The S&P 500 reached a new all-time high on Tuesday, marking its 54th new 52-week high in the past year. The index is up 15% over the past year and nearly 88% over the past five years. Passive investing has been performing well, but can it continue? Investors may want to consider the Invesco S&P 500 Equal Weight ETF (RSP) as an alternative option. RSP has trailed the SPDR S&P 500 ETF (SPY) over the past 52 weeks due to the dominance of mega-cap AI-related stocks in the market. However, RSP’s equal-weight approach offers potential benefits in certain market conditions.

Equal-weight ETFs like RSP rebalance quarterly to maintain equal weightings across stocks, similar to a well-managed sports team getting production from various players. RSP’s top holding, SanDisk, has seen significant gains since its rebalance, outperforming SPY’s top holding Nvidia. RSP has shown outperformance compared to SPY in recent weeks, and historical data suggests that it tends to do well when smaller, value-oriented stocks are performing strongly.

The S&P 500 forward P/E ratio is currently high, leading to concerns about market valuations. Equal-weighted portfolios like RSP have historically performed well in elevated valuation environments, offering potential for appreciation. As large- and mega-cap stocks face high valuations, RSP could be a strategic addition to investment portfolios. Investors may consider adjusting their allocation between SPY and RSP to capitalize on potential market trends.

Read more at Barchart: With SPY Breaking Records, Is It Time to Bet on RSP?