The S&P 500 is already significantly influenced by what some call the “Ten Titans,” but there’s an ETF that elevates this investment approach even further.
“Ten Titans” refers to the largest US growth companies by market cap, now expanded to include “The Magnificent Seven”—Nvidia, Microsoft, Apple, Amazon, Alphabet, Meta Platforms, and Tesla. To that mix, we also add Broadcom, Oracle, and Netflix. Collectively, these Seven contribute significantly, accounting for 33.7% of the S&P 500, while the broader 10 Titans make up about 38.2% of the index.
Enter the Invesco S&P 500 Top 50 ETF (xlg), which amplifies the focus on these Titans to a striking 62%. So why choose this ETF for better exposure to these key players?
Doubling Down on the Top 10% of the S&P 500
Invesco, the firm behind the largest NASDAQ-100 ETF, also manages this S&P-focused option. While the Invesco QQQ Trust emphasizes growth stocks, it doesn’t include Oracle because it trades on the NYSE.
The Invesco S&P 500 Top 50 ETF aims at 50 different stocks across both exchanges, making it a potentially more effective vehicle for investing in top growth companies than QQQ. It covers major players like Oracle, Eli Lilly, Salesforce, and ServiceNow that aren’t featured in QQQ.
This approach of investing in the top 10% of growth-oriented components in the S&P 500 notably increases exposure to tech-driven sectors. Let’s take a look at how the weightings of these 10 Titans compare to other popular ETFs.
|
Company |
Invesco S&P 500 Top 50 ETF |
Invesco QQQ Trust |
Vanguard S&P 500 Growth ETF |
Vanguard S&P 500 ETF |
|---|---|---|---|---|
|
Nvidia |
13.1% |
10.06% |
14.89% |
8.06% |
|
Microsoft |
11.19% |
8.59% |
7.08% |
7.37% |
|
Apple |
10.13% |
7.78% |
4.9% |
5.76% |
|
Amazon |
6.43% |
5.55% |
4.4% |
4.11% |
|
Alphabet |
6.55% |
5.4% |
6.94% |
3.76% |
|
Meta Platform |
4.88% |
3.75% |
5.77% |
3.12% |
|
Broadcom |
4.13% |
5.25% |
4.74% |
2.57% |
|
Tesla |
2.9% |
2.89% |
2.97% |
1.61% |
|
Oracle |
1.14% |
0% |
1.42% |
0.77% |
|
Netflix |
1.55% |
2.92% |
1.69% |
0.92% |
|
Total |
62% |
52.19% |
54.8% |
38.05% |
As illustrated, the Invesco S&P 500 Top 50 ETF provides a more concentrated focus on the Titans compared to both Invesco QQQ and the Vanguard S&P 500 Growth ETF. This kind of concentration has proved beneficial in recent years, leading this ETF to outshine others even after accounting for dividends.
The Invesco offering does come with a higher fee compared to Vanguard’s funds, sitting at 0.2% for the Invesco S&P 500 Top 50 ETFs and QQQ, while Vanguard’s S&P 500 Growth ETFs charge 0.07% and the S&P 500 ETFs just 0.03%. Still, for larger investments, the difference might not be too significant—0.2% translates to only $20 for every $10,000 invested.
Maximizing Exposure to the Titans
For investors keen on megacap growth stocks, the Invesco S&P 500 Top 50 ETF can serve as a strong option. If, say, someone finds it hard to choose between individual Titans, this ETF offers a straightforward way to invest broadly. On the flip side, if an investor already has a portfolio overflowing with S&P 500 value stocks, like Berkshire Hathaway, Walmart, and JPMorgan Chase, this ETF allows for a more targeted focus on growth stocks without those names.
However, before diving in, it’s prudent to consider the volatility associated with such concentrated funds. Large companies like Nvidia can sway the market independently, and their performance can significantly impact the surrounding industry, affecting other Titans. Essentially, if Nvidia has a strong quarter, it can create ripples throughout the market for all the Titans, amplifying impacts on the ETF.
In conclusion, while the Invesco S&P 500 Top 50 ETF offers a convenient path to tap into the Titans, this concentration brings with it both potential rewards and risks, behaving almost like a double-edged sword.
