While the information technology sector is the largest in the iShares S&P 500 (IVV) on a market-cap basis, it is neither the best performer this year nor the most represented on an individual stock basis. For those investors wanting exposure to the S&P 500, but in a more diversified manner, there are other equally weighted alternatives to consider.
IVV's largest sector exposure is information technology (20% of assets), followed by financials (16%) and health care (15%). However, in the first half of 2015, technology and financials were the fourth and fifth best performing sectors. The best performances in the first half came from health care and consumer discretionary sectors, up 8.7% and 6.0%, respectively. The S&P 500 Index was up 0.2%
Guggenheim S&P 500 Equal Weight ETF (RSP 80 Overweight) holds the same 500 companies as IVV, but due to its equal-weighting approach and quarterly rebalance, the sector exposure is quite different than the market-cap weighted IVV. With the stakes of each company of equal size, Apple (AAPL) and Alleghany Technologies (ATI) have the same impact on RSP's returns, despite the $700 billion difference in their market capitalizations.
As of the end of June, from a sector perspective relative to IVV, RSP had more exposure to financials (17%) and consumer discretionary (17%) and less to technology (13%) and health care (11%). RSP has a 0.40% net expense ratio and trades with a $0.01 bid/ask spread, the former higher than IVV.
Alps Equal Sector Weight ETF (EQL) takes a distinct approach to equal weighting the S&P 500 Index. EQL holds the nine Select Sector SPDRs, covering the 10 sectors of the S&P 500 index (telecom services is part of the technology ETF). While it also rebalances every three months like RSP, the sector exposure it provides is different than it is for RSP and for IVV.
Through the Materials Select Sector SPDR (XLB) and Utilities Select Sector SPDR (XLU), EQL provides more exposure to some of the smaller sectors in the market-cap weighted S&P 500 index. XLB, XLU and the other ETF holdings are market-cap weighted ETFs that provide more exposure to the largest companies in the sector, such as Monsanto (MON) and Southern Com (SO 42). In contrast, financials and technology ETF stakes are smaller in EQL than other S&P 500 index based alternatives. EQL has a 0.30% net expense ratio and trades with a $0.04 bid/ask spread.