SPY beats RSP by $1,100 over 20 years on Big Tech

The S&P 500 is up 13 percent year to date through Aug. 28, trailing its equal-weight counterpart's more than 16 percent gain, yet cap-weighting has delivered superior long-term returns. The benchmark weights constituents by market capitalization, meaning larger stocks exert more influence on the index's direction than smaller ones.

"Most were tech names because the market had real trouble accurately discounting the real-world implications of Moore's Law," said Nicholas Colas, co-founder of DataTrek, citing research on which stocks generated all shareholder value in global and U.S. stock markets from 1990 to 2020.

The 10 largest S&P 500 constituents — Nvidia, Apple, Microsoft, Amazon, Alphabet, Broadcom, Meta Platforms, Micron Technology and Tesla — carry a combined 37 percent weight in the benchmark, accounting for nearly 40 percent of its total value. A $1,000 investment in the SPDR S&P 500 ETF Trust (SPY) 20 years ago would be worth about $8,600 today, a gain of more than 750 percent. The same sum placed in the Invesco S&P 500 Equal Weight ETF (RSP) would be worth less than $7,500, a gain of less than 650 percent.

The performance gap widened substantially in recent years as AI-driven gains concentrated in mega-cap technology. Research by Hendrik Bessembinder, a finance professor at the W.P. Carey School of Business at Arizona State University, found that the best-performing 4 percent of listed companies explains the net gain for the entire U.S. stock market since 1926, as other stocks collectively matched Treasury bills.

Narrow Breadth Drives Long-Term Returns

The 80-20 Rule — also known as the Pareto Principle — holds that 20 percent of stocks tend to generate 80 percent of returns. When applied to equities, the principle understates the phenomenon. Bessembinder's research shows that from 1990 to 2020, just 1 percent to 2 percent of public companies generated all the shareholder value in global and U.S. stock markets.

Colas noted that since 2023, the power of AI has more than doubled every year. "If that continues for the next five years, AI will be more than 3,000 times more capable than today," he said. "This is why global Big Tech is all-in on the technology: not for today's models, but those in 2031."

This dynamic suggests the S&P 500 will retake its traditional lead over its equal-weight sibling. "Both versions of the S&P 500 used to trade very similarly, but their price return correlation has dropped a lot in the 2020s," Colas added. "The link is still strong when macro fears dominate, but it is much weaker when investor confidence is strong."

AI Momentum Widens the Performance Gap

The equal-weight index casts a wider net, capturing gains from tomorrow's winners before they command larger weights. A cap-weighted index, by contrast, simply lets its winners run. Narrow breadth — in which a relatively low number of stocks do the most heavy lifting — is the norm in equity markets, and as bull markets mature, breadth tends to widen as investors rotate into sectors offering better risk-reward profiles.

For long-term investors, history suggests fighting a cap-weighted index — and the Big Tech AI revolution driving it — is a poor proposition. The 2026 year-to-date outperformance of the equal-weight index is historically unusual, but it does not change the structural advantage that concentration has provided over two decades.

Figures cited are as of Aug. 28, 2026, per Kiplinger. Investors should verify current data against the latest official announcements before making decisions.

This article is for informational purposes only and does not constitute investment advice.