3 Great Broad-Market ETFs That Are Not Market-Weighted

Brian Paoli: For many investors, diversification is as simple as owning a broad-market index fund. And when an ETF says they own hundreds or even thousands of stocks, it’s a fairly safe assumption. But few people look into the underlying methodology that drives what an ETF is actually buying.

Many of the most popular ETFs on the market weight their holdings by market caps, an approach that automatically assigns the highest weights in a portfolio to the largest companies. And when stocks at the top of the market already look expensive, it may be time to take a different approach to diversify your portfolio.

Today, I’m going to share three ETFs that capture the breadth of the US stock market without weighting by market caps.

3 Great Broad-Market ETFs That Are Not Market-Weighted

1. Dimensional US Core Equity 2 ETF DFAC
2. Invesco S&P 500 Equal Weight ETF RSP
3. Schwab Fundamental U.S. Large Company ETF FNDX

First up is Gold-rated Dimensional US Core Equity 2 ETF, which trades under the ticker DFAC. It is a US large-blend ETF that holds over 2,500 individual stocks and weights in favor of stocks with smaller market caps, higher profitability, and cheaper valuations.

The ETF still includes US mega-cap stocks like Nvidia NVDA, Apple AAPL, and Microsoft MSFT among its top holdings, as the tilts used are relatively modest and don’t want to deviate too much from broad-market indexes that use market-cap weighting. You can think of this kind of like the Vanguard Total Stock Market ETF VTI

but with some extra steps to limit concentration and diversify further down the market-cap spectrum.

For investors wanting to limit exposure to mega-cap stocks even more, Invesco S&P 500 Equal Weight ETF, ticker RSP, provides a solution. It tracks the S&P 500 Equal Weight Index, which pulls all the constituents of the S&P 500 and weights them equally on a quarterly cadence.

Despite having the same holdings, equal weighting leads to very different stock and sector concentration compared to a market-cap-weighted S&P 500 index fund. For example, it nearly completely eliminates stock concentration concerns and underweights the information technology sector by roughly 24 percentage points relative to the S&P 500 index. The trade-off is that equal weighting requires more trading during a scheduled rebalance, which in turn leads to higher turnover.

The last ETF for today is Gold-rated Schwab Fundamental U.S. Large Company ETF, ticker FNDX. The ETF tracks the RAFI Fundamental High Liquidity US Large Index, which targets large- and mid-cap stocks and weighs them based on a fundamental score that looks at sales, retained operating cash flow, and dividends plus buybacks.

This tilts the portfolio in favor of value stocks like Chevron CVX and Berkshire Hathaway BRK.B. Mega-cap stocks like Nvidia NVDA still make it into the portfolio, but receive substantially lower weights than a market-cap-weighted peer. For example, at the end of August 2026, Nvidia didn’t even make up 1% of the portfolio. In a typical broad market-cap-weighted ETF, Nvidia would make up over 7% of the portfolio.

This ETF works through a sort of contrarian methodology. When the fund rebalances, it increases exposure to stocks that have become cheaper relative to their fundamental measures and trims those that have become more expensive. This creates a buy-low, sell-high mentality that performs exceptionally well when means revert and overvalued stocks reach correction territory.

The bottom line is that broad-market exposure doesn’t have to mean market-cap weighting. Whether you prefer factor tilts, equal weighting, or fundamentals-based indexing, these ETFs offer three distinct approaches to diversify beyond the largest stocks in the market.