Investing in the Vanguard S&P 500 ETF (VOO)? Beware of This 1 Sneaky Risk.

If you're investing in the Vanguard S&P 500 ETF (VOO +0.85%) -- or the SPDR S&P 500 ETF (SPY +0.85%) -- that's great. You're now a partial owner of 500 of America's biggest companies.

Even Warren Buffett has recommended low-cost S&P 500 index funds for most of us small investors. In his 2016 letter to shareholders, he noted, "Over the years, I've often been asked for investment advice ... My regular recommendation has been a low-cost S&P 500 index fund."

But there's a bit of a problem with these index funds today: They're quite concentrated. Here's a closer look at this issue, along with a way to invest in the S&P 500 -- without the concentration.

Check out the recent top 10 components of the Vanguard S&P 500 ETF

Data: Vanguard.com, as of July 31, 2026.

See anything interesting? The top 10 holdings make up fully 38% of the fund's total value. And the top three holdings make up a whopping 20%. So yes, you'll own a bit of 500 different companies with this fund, but the lion's share of your money will be in relatively few of them. That's good and bad.

It's good because this is a market cap-weighted fund, with larger companies holding more sway than smaller ones. And the biggest ones are the ones that have grown the most. Nvidia has averaged annual gains of 70% over the past three years.

But if there's a stock market crash or correction, as there invariably is now and then, high-tech stocks often fall harder than their counterparts. That can be OK as long as you have a very long-term investing period. But it's not ideal.

And what if some smaller companies in the index do really well? If one triples in value, you're not going to see much of an effect in the fund's overall value. Here are the weightings of some other well-known companies

Data: Slickcharts.com, on Sept. 9, 2026.

Clearly, owning some shares of a typical S&P 500 index fund won't be putting much of your money in stocks like these -- even though they can be big growers, too.

If you're now feeling uneasy about the concentration of the Vanguard S&P 500 ETF and similar funds, there's a solid alternative to consider: an equal-weighted fund, such as the Invesco S&P 500 Equal Weight ETF (RSP +0.80%). Its 500 components are rebalanced quarterly, so between rebalancings, you'll see some fluctuation in the weightings as various stocks gain or lose value from day to day and year to year, but overall, their weightings will be quite similar. This permits FedEx and Costco (and hundreds of other companies) to influence the index as much as Nvidia and Apple.