Investing in an exchange-traded fund (ETF) can be an excellent way to diversify your portfolio — but not always. If you look at many top-performing ETFs right now, you’ll see a common theme: Apple, Microsoft, and Nvidia are often the top holdings. As the three most valuable stocks in the world, they often account for a significant chunk of an ETF’s holdings, perhaps too much. These stocks have performed extremely well in recent years, which explains why ETFs that have done well would have large positions in them.
But if you’re investing today, you may not want to invest in those types of ETFs. You may not even want ones that track the S&P 500, which may also be a bit too exposed to not just those three stocks but tech stocks as a whole. A potentially safer option to consider is the Invesco S&P 500 Equal Weight ETF (RSP -0.10%).
