ETFs

By Tony Dong, MSc, CETF on February 19, 2025
Estimated reading time: 6 minutes

By Tony Dong, MSc, CETF on February 19, 2025
Estimated reading time: 6 minutes

Concerned about the heavy tech weighting in U.S. stock indexes? Explore ETF alternatives for balanced exposure to U.S. equities.

Big Tech CEOs like Jeff Bezos, Elon Musk, Mark Zuckerberg and Sundar Pichai were front and centre at Donald Trump’s inauguration—a sign of their growing influence in the years to come. Today, their dominance is just as evident in the stock market, particularly for investors who own U.S. equities through popular benchmarks like the S&P 500 and Nasdaq-100 Index. And for some Canadian investors, this heavy tech weighting is a concern. While the sector has driven much of the market’s gains, it also introduces concentration risk, meaning a downturn in tech could drag down a large portion of the index.

So, if you’re worried about being overexposed to U.S. tech, what are your options? Should you even try to reduce that exposure, or does it make sense to just ride the trend? Well, various asset managers have considered these concerns and introduced some exchange-traded fund (ETF) options designed to mitigate concentration risk. Here’s a look at the arguments for and against tech-heavy investing, along with some ETF alternatives that provide a more balanced approach to U.S. equities.

The answer depends on which benchmark you use, but across the board, U.S. stock indexes are heavily overweight in tech.

Take the S&P 500 Index. At the end of 2024, technology made up 32.5% of the index. The Nasdaq-100 Index is even more concentrated with 59.5% weighted toward technology. Both the S&P 500 and Nasdaq-100 are market cap-weighted. This means the larger a company’s total market value (share price multiplied by available shares), the more weight it holds in the index. When tech stocks perform well, they climb higher in the rankings, gaining an even larger share of the index.

For Canadian investors, the consequence is clear: When you buy into funds tracking these indexes, most........

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