MW These twists on the S&P 500 have been standout investments in 2026
By Philip van Doorn
Factor strategies to narrow down the S&P 500 or change its weighting have been performing much better so far this year
The S&P 500's weighting by companies' market capitalization has worked out well for index-fund investors during the long bull market. But so far in 2026, factor strategies that weight the stocks in other ways have performed much better.
So far in 2026, a number of index funds that follow alternative strategies to track subsets of the S&P 500 or change the index's weighting have performed quite well.
The S&P 500 SPX is weighted by market capitalization. This means success is rewarded, with large companies that have grown rapidly or been excellent financial performers dominating the index's weighting. According to analysts at Ned Davis Research, the index is now 39.1% concentrated to its largest 10 companies by market cap - down from 41.3% in October, which marked the highest concentration level since at least 1972.
Among the largest 10 components of the S&P 500, all except Nvidia (NVDA) and Apple $(AAPL)$ (the largest two components of the index) were down for 2026 through Wednesday, with Microsoft $(MSFT)$ (the third-largest component) down 17%. But the index itself was still up 1.5%, showing increasing interest in companies beyond Big Tech. Those figures exclude dividends.
Although the index has held up nicely, investors have been flocking to index funds that follow alternative strategies, such as an equal-weighed approach to the S&P 500 XX:SP500EW. Last week Isabel Wang spoke with money managers and traders who described this dramatic shift in the stock market.
Money is flowing into alternative S&P 500 strategies
Nick Kalivas, Invesco's head of factor strategy for exchange-traded funds, told MarketWatch of significant "net new flow" into several ETFs that are designed to offer investors greater diversification within the S&P 500. For the cap-weighted index, he said that the "Magnificent Seven" stocks -Nvidia, Apple, Microsoft, Amazon (AMZN), Alphabet $(GOOGL)$, Meta Platforms (META) and Tesla $(TSLA)$ - as a group had lowered the S&P 500's return so far in 2026 by about 2%.
Funds seeing a high level of interest have included the Invesco S&P 500 Equal Weight ETF RSP, which had taken in $8.9 billion in net new flow during 2026 through Friday, Kalivas said. RSP now has about $90 billion in assets under management. It has returned 6.3% this year, compared with a return of 1.6% return for the for State Street SPDR S&P 500 ETF Trust SPY, which tracks the S&P 500 with a traditional market-cap weighting. These and subsequent investment returns in this article include reinvested dividends and are net of fund expenses.
"You have seen some broadening" of performance within the S&P 500 this year, Kalivas said. "Certainly, equal-weight technology has done better than cap-weighted."
He added: "When you dive a bit deeper, you have had a rally in smaller semiconductor-related names."
"Net new flow" is a term specific to ETFs. It refers to inflows that cause market makers to create new shares of exchange-traded funds. To understand that, we need to explain how ETFs are priced.
A traditional open-ended mutual fund's share price is calculated once a day at the market close. This means adding up the market value of all the fund's investments, plus its cash, as of the market close. That net asset value is then divided by the number of shares in the fund in order to arrive at the net asset value per share, which we will call the NAV. Investors can only buy or sell an open-ended mutual fund's shares at the market close. The fund will issue or redeem shares every day based on investors' buy and sell orders.
An exchange-traded fund will calculate its NAV every day the same way. But since it is publicly traded on an exchange, the ETF will also have a share price that may match the NAV or trade a bit higher or lower than the NAV. A market maker at the exchange where the ETF is listed will decide whether the ETF should issue new shares or redeem shares in order to keep the share price close to the NAV.
Kalivas said that other Invesco factor strategies that narrow down the S&P 500 and have received significant inflows so far in 2026 include the firm's S&P 500 Revenue ETF RWL, S&P 500 Quality ETF SPHQ and S&P 500 Low Volatility ETF SPLV.
Comparing nine S&P 500 factor strategies during 2026
Back in November, we looked at nine Invesco factor strategies tracking subsets of or alternate weightings to the S&P 500 and found that the Invesco S&P 500 Momentum ETF SPMO stood out by beating the cap-weighted S&P 500 and all the other factor strategies by wide margins for one-, three-, five- and 10-year periods.
In light of this year's sea change for the stock market, it is time for an update.
We are looking at the same set of 11 ETFs, starting with SPY and one of several large alternatives that take the cap-weighted approach, the Vanguard S&P 500 ETF VOO. The nine Invesco S&P 500 factor ETFs follow, sorted by their performance this year through Wednesday:
ETF YTD total return 1-year total return 3-year total return 5-year total return 10-year total return
State Street SPDR S&P 500 ETF Trust 1.6% 18% 82% 95% 320%
Vanguard S&P 500 ETF 1.7% 18% 82% 96% 322%
Invesco S&P 500 High Dividend Low Volatility ETF 9.4% 9% 35% 62% 129%
Invesco S&P 500 Pure Value ETF 7.6% 24% 45% 80% 200%
Invesco S&P 500 Quality ETF 7.5% 16% 86% 103% 305%
Invesco S&P 500 Pure Growth ETF 7.5% 18% 68% 57% 254%
Invesco S&P 500 Low Volatility ETF 7.1% 6% 31% 55% 146%
Invesco S&P 500 Equal Weight ETF 6.3% 15% 46% 65% 228%
Invesco S&P 500 Revenue ETF 5.2% 20% 66% 100% 278%
Invesco S&P 500 GARP ETF 1.8% 11% 39% 58% 314%
Invesco S&P 500 Momentum ETF 1.0% 21% 128% 144% 443%
Source: LSEG
Click on the tickers for more about each fund, including expense ratios.
Read: Tomi Kilgore's detailed guide to the information available on the MarketWatch quote page
The Invesco S&P 500 Momentum ETF brings up the rear so far for 2026, although it still beats all other factor approaches, along with the cap-weighted index funds, for the three-, five- and 10-year periods. This ETF holds 100 stocks. The portfolio is reset twice a year when stocks in the S&P 500 are ranked by how much their prices have risen over the previous 12 months, then scored to take volatility into account. The portfolio is made up of the 20% of companies in the S&P 500 that score highest, then weighted by a combination of the momentum score and market cap.
The Invesco S&P 500 High Dividend Low Volatility ETF SPHD has been the best performer on the list so far this year. The fund holds 50 stocks, weighted by dividend yield. The portfolio is reconstituted twice a year, first trimming the S&P 500 to the 75 stocks with the highest trailing dividend yields, and then cutting that down to the 50 showing the least daily price volatility over the past 12 months.
The Invesco Pure Value ETF RPV has returned 7.6% this year, while the Pure Growth ETF RPG has returned 7.5%. S&P Dow Jones Indices maintains overlapping S&P 500 Value and Growth indexes. The index provider's value scores are based on ratios of companies' book value, earnings and revenue to price. Growth scores incorporate three years of profit and sales growth, as well as 12-month price momentum. About a third of the S&P 500 companies will have high enough value and growth scores to straddle the Value and Growth indexes. That third of the index is excluded from the Pure Value and Pure Growth indexes tracked by these two ETFs.
The Invesco S&P 500 Quality ETF has returned 7.5% this year. It combines returns on equity, debt-to-book value and an "accruals ratio" of operating assets to total assets. The index tracked by this fund is rebalanced twice a year and weighted by the product of each stock's quality score and market capitalization. Kalivas pointed out that this fund's methodology means that it only holds Apple among the Magnificent Seven, "with no hyperscaler exposure." Hyperscalers are companies that have been spending the most heavily on building infrastructure to support the development of generative artificial intelligence technology. Going further, Kalivas said that "when you increase your asset base" by spending heavily on plant and equipment, "it lowers your profitability," which is reflected in the makeup of the SPHQ portfolio.
The Invesco S&P 500 Low Volatility ETF has returned 7.1% so far in 2026. It narrows the S&P 500 to 100 stocks showing the least price volatility during the preceding 12 months when it is reconstituted quarterly. The portfolio weighting is based on the inverse of each stock's price volatility.
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February 26, 2026 10:41 ET (15:41 GMT)
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