Alternatives to VOO to reduce Mag 7 exposure

[DooDiligence]

I saw someone make a post recently but can't find it. I have a girlfriend who has accounts with a firm charging the usual 2% & 10 and she's tired of the churn and associated weak returns after fees. I'd like to get her into a simple setup via Fidelity with some BRK, VOO, VXUS and one or two other funds that reduce the tech exposure of VOO. I searched Reddit and saw XMAG and RSP. XMAG seems to be smaller, with less liquidity and 0.35% expense. RSP has slightly lower fees and better liquidity. What other options would be recommended for someone who has no interest in trading, or would these be sufficient.

[DooDiligence]

9 minutes ago, DooDiligence said:

I saw someone make a post recently but can't find it. I have a girlfriend who has accounts with a firm charging the usual 2% & 10 and she's tired of the churn and associated weak returns after fees. I'd like to get her into a simple setup via Fidelity with some BRK, VOO, VXUS and one or two other funds that reduce the tech exposure of VOO. I searched Reddit and saw XMAG and RSP. XMAG seems to be smaller, with less liquidity and 0.35% expense. RSP has slightly lower fees and better liquidity. What other options would be recommended for someone who has no interest in trading, or would these be sufficient.

 

Gonna add VTI in there. Actually, after thinking about bit it seems like VOO + VTI + VXUS + BRK might do the job. Just need to figure out the weighting.

[Munger_Disciple]

11 minutes ago, DooDiligence said:

I saw someone make a post recently but can't find it. I have a girlfriend who has accounts with a firm charging the usual 2% & 10 and she's tired of the churn and associated weak returns after fees. I'd like to get her into a simple setup via Fidelity with some BRK, VOO, VXUS and one or two other funds that reduce the tech exposure of VOO. I searched Reddit and saw XMAG and RSP. XMAG seems to be smaller, with less liquidity and 0.35% expense. RSP has slightly lower fees and better liquidity. What other options would be recommended for someone who has no interest in trading, or would these be sufficient.

 

I would recommend RSP over XMAG. RSP is an equal weighted index of the largest 500 companies in the US whereas XMAG is a cap-weighted index of 493 largest US companies ex-MAG7. While XMAG avoids the largest 7 companies, it still includes a lot of frothy companies with even higher valuation than the MAG7 (think Broadcom or Palantir). In the RSP, each of these overvalued companies have only 1/500 weight. 

Edited December 25, 2025 by Munger_Disciple

[DooDiligence]

Just now, Munger_Disciple said:

 

I would recommend RSP over XMAG. RSP is an equal weighted index of the largest 500 companies in the US whereas XMAG is a cap-weighted index of 493 largest US companies ex-MAG7. While XNAG avoids the largest 7 companies, it still includes a lot of frothy companies with even higher valuation than the MAG7 (think Broadcom or Palantir). In the RSP, each of these overvalued companies have only 1/500 weight. 

 

Awesome, I was unaware of that subtle difference between RSP and XMAG.

[Munger_Disciple]

5 minutes ago, DooDiligence said:

 

Awesome, I was unaware of that subtle difference between RSP and XMAG.

 

 and the fees are lower too!

[buylowersellhigh]

3 hours ago, DooDiligence said:

 

Gonna add VTI in there. Actually, after thinking about bit it seems like VOO + VTI + VXUS + BRK might do the job. Just need to figure out the weighting.

I would be curious to hear the percentages you finally go with.  I am in a similar boat with my sister, to help her.

[73 Reds]

5 hours ago, DooDiligence said:

I saw someone make a post recently but can't find it. I have a girlfriend who has accounts with a firm charging the usual 2% & 10 and she's tired of the churn and associated weak returns after fees. I'd like to get her into a simple setup via Fidelity with some BRK, VOO, VXUS and one or two other funds that reduce the tech exposure of VOO. I searched Reddit and saw XMAG and RSP. XMAG seems to be smaller, with less liquidity and 0.35% expense. RSP has slightly lower fees and better liquidity. What other options would be recommended for someone who has no interest in trading, or would these be sufficient.

Curious why you'd want to reduce or eliminate the most successful, innovative companies.  Personally, I'd eliminate those near or at the bottom, though some of these stocks eliminate themselves by failure but only after they have already negatively affected the index performance.

[UK]

6 hours ago, 73 Reds said:

Curious why you'd want to reduce or eliminate the most successful, innovative companies.  Personally, I'd eliminate those near or at the bottom, though some of these stocks eliminate themselves by failure but only after they have already negatively affected the index performance.

 

Also regarding equal weithted indices, I am not sure I understand how this works, but isnt it by default kind of constant 'sellling the flowers and keeping the weeds' strategy?

[Jay Rent]

VTI and VOO are very correlated so just go with the total market VTI.     (Although VOO has outperformed VTI over the last 5 years as larger companies have outperformed).

If the Mag7 have lower returns in the future due to their higher valuations, VTI will slightly outperform VOO. 

 

I am not a fan of RSP.   All  an equal weight index does is tilt toward smaller companies, value based companies and as UK mentions the weeds.   It also cancels out the good with the bad.    You can see that as WBD has become the largest weight with its runup, however by digging you can find another company that has fallen equally.

 

Over 5 years VTV has returned 13.14% compared to RSP 10.79%.   (compared to the S&P 500 at 15%)   .    The difference with VOE (11.16%) and VBR (10.94%) is less however just by how it is constructed it will not beat them.    So just go with VTV, VOE or VBR.

 

If you want to reduce Mag7 ,  just tilt toward mid cap (VO)  or if you want to reduce downside exposure tilt toward value such as (VTV and VOE)

 

VTV will give you exposure to BRK.

[SafetyinNumbers]

Have you considered ELF.TO? They own a bunch of VOO but also a bunch of other global and US quality stocks via closed end funds EVT.TO and UNC.TO. Trades at a ~30% discount to book and probably a ~40% discount to liquidation which offers some margin of safety. 

[Ross812]

AVUS has a bit of a small value tilt versus VTI and holds a little less in the Mag 7. 

 

Personally I would blend - SPLG (or SPMO if you want to weight VTV higher), VTV, AVUV, and VXUS. I always mix in some gold and managed futures. 

[formthirteen]

39 minutes ago, SafetyinNumbers said:

Have you considered ELF.TO? They own a bunch of VOO but also a bunch of other global and US quality stocks via closed end funds EVT.TO and UNC.TO. Trades at a ~30% discount to book and probably a ~40% discount to liquidation which offers some margin of safety. 

 

I was thinking about ELF too. The special dividend was $150 this year, AFAIK. The dividend yield ranges between 23-829% depending on which site you check. I haven't checked what the correct yield is...

[SafetyinNumbers]

2 minutes ago, formthirteen said:

 

I was thinking about ELF too. The special dividend was $150 this year, AFAIK. The dividend yield ranges between 23-829% depending on which site you check. I haven't checked what the correct yield is...

The 100-1 stock split probably confuses the sites. The regular dividend is only $0.16 per year so less than a 1% dividend. 

[DooDiligence]

8 hours ago, Jay Rent said:

VTI and VOO are very correlated so just go with the total market VTI.     (Although VOO has outperformed VTI over the last 5 years as larger companies have outperformed).

If the Mag7 have lower returns in the future due to their higher valuations, VTI will slightly outperform VOO. 

 

I am not a fan of RSP.   All  an equal weight index does is tilt toward smaller companies, value based companies and as UK mentions the weeds.   It also cancels out the good with the bad.    You can see that as WBD has become the largest weight with its runup, however by digging you can find another company that has fallen equally.

 

Over 5 years VTV has returned 13.14% compared to RSP 10.79%.   (compared to the S&P 500 at 15%)   .    The difference with VOE (11.16%) and VBR (10.94%) is less however just by how it is constructed it will not beat them.    So just go with VTV, VOE or VBR.

 

If you want to reduce Mag7 ,  just tilt toward mid cap (VO)  or if you want to reduce downside exposure tilt toward value such as (VTV and VOE)

 

VTV will give you exposure to BRK.

 

Thanks, I noticed that with regards to WBD recently hitting the top 10 holdings. I agree on VTI too. I appreciate the tip on VTV too.

[DooDiligence]

8 hours ago, SafetyinNumbers said:

Have you considered ELF.TO? They own a bunch of VOO but also a bunch of other global and US quality stocks via closed end funds EVT.TO and UNC.TO. Trades at a ~30% discount to book and probably a ~40% discount to liquidation which offers some margin of safety. 

 

Thanks for the ELF tip.

[DooDiligence]

8 hours ago, Ross812 said:

AVUS has a bit of a small value tilt versus VTI and holds a little less in the Mag 7. 

 

Personally I would blend - SPLG (or SPMO if you want to weight VTV higher), VTV, AVUV, and VXUS. I always mix in some gold and managed futures. 

 

Good advice on the blend.

[Spekulatius]

Equal weighted is even more flawed as market cap weighted as it weighs companies with small market caps exactly the same way than the largest ones. That indeed means putting more money in inferior small business than superior large ones. It can work for a while but it’s unlikely to work over the long run.

 

I think an alternative would be an mid cap index fund (SP400) as part of the mix to avoid a heavy allocation to the huge market cap bubble stocks.

 

I think another solution may be a fundamentally weighted ETF. Those ETF use fundamental data to determine the weighing for each stock so GOOGL, MSFT, AVGO are in but with less weight. Schwab has some with reasonable fees (0.25%) like FNDB. It does not seem to contain ridiculously valued stocks like TSLA, so likely less vulnerable to a correction than the SPY. 

[Red Lion]

On 12/25/2025 at 3:35 PM, 73 Reds said:

Curious why you'd want to reduce or eliminate the most successful, innovative companies.  Personally, I'd eliminate those near or at the bottom, though some of these stocks eliminate themselves by failure but only after they have already negatively affected the index performance.

For every company being eliminated at the bottom there’s a new company that replaces it. I’ve had a few investments get included over the last few years, and they’re all still growing. 
 

So even an equal weight index would dump the losers, and add the newer winners.  

[73 Reds]

8 hours ago, Red Lion said:

For every company being eliminated at the bottom there’s a new company that replaces it. I’ve had a few investments get included over the last few years, and they’re all still growing. 
 

So even an equal weight index would dump the losers, and add the newer winners.  

Yeah, that will keep the index from going to -0- but the stocks that get eliminated negatively affect the index performance until they are eliminated.  Why eliminate the companies (Mag-7) that prop up performance?  

[Spekulatius]

1 hour ago, 73 Reds said:

Yeah, that will keep the index from going to -0- but the stocks that get eliminated negatively affect the index performance until they are eliminated.  Why eliminate the companies (Mag-7) that prop up performance?  

Because the are likely overvalued and really one correlated trade on AI. If you add all the AI stocks, it’s probably 30% of the SP500 index which is disproportionately higher than the contribution of AI to the economy.

 

If you don’t like the AI trade at this point, you should not own QQQ or SP500. Same issue than in Y2000 when the SP500 was highly weighted towards tech stocks at bubbly valuations.

Edited December 28, 2025 by Spekulatius

[73 Reds]

3 minutes ago, Spekulatius said:

Because the are likely overvalued and really one correlated trade on AI. If you add all the AI stocks, it’s probably 30% of the SP500 index which is disproportionately higher than the contribution of AI to the economy.

 

If you don’t like the AI trade at this point, you should not own QQQ or SP500. Same issue than in Y2000 when the SP500 was highly weighted towards tech stocks at bubbly valuations.

OK, but it is a monumental stretch to suggest that overvalued stocks will suddenly drop to the bottom of the index performance-wise.   There is a reason they are overvalued and if that reason doesn't change (i.e., they continue to perform well operationally) price may revert back to a sort-of mean but that doesn't mean they should be eliminated from an index.  My preference would be to eliminate stocks that are operationally deficient with prices that reflect such failure.

[Spekulatius]

On 12/28/2025 at 3:35 PM, 73 Reds said:

OK, but it is a monumental stretch to suggest that overvalued stocks will suddenly drop to the bottom of the index performance-wise.   There is a reason they are overvalued and if that reason doesn't change (i.e., they continue to perform well operationally) price may revert back to a sort-of mean but that doesn't mean they should be eliminated from an index.  My preference would be to eliminate stocks that are operationally deficient with prices that reflect such failure.

All the techs stocks are included  in FNDB but more according to their economic weight, not the market cap weight. Tesla for example is not in the top 10 because it has minuscule profits and the market cap is out of sync with its economic weight.

 

There are problems with either approach but I think the economic weight approach does make sense if you think that market valuations are out of whack for a large segment of the market.

Edited December 31, 2025 by Spekulatius

[Red Lion]

2 hours ago, 73 Reds said:

Yeah, that will keep the index from going to -0- but the stocks that get eliminated negatively affect the index performance until they are eliminated.  Why eliminate the companies (Mag-7) that prop up performance?  

I think the cap weighted index has outperformed for quite a while now, but I do remember reading about back tests saying equal weighted would outperform over the long run. Back when people used to talk about the “law of large numbers”. Don’t hear much about that anymore since it seems easier in this market for GOOG to go from 1 trillion to 2 trillion than a random large cap to go from 100-200 billion.  
 

I have mostly individual stocks, and I have 15% in GOOG/AMZN, so if I were looking to buy a fund it would be to get some more diversification. 
 

It seems like Buffett’s advice of 90% s&p and 10% t-bills performs quite well. But if we have a big sector rotation away from the mega cap / tech trade, I think equal weighted would outperform. 
 

 

[TwoCitiesCapital]

Research Affiliates and Dimensional Fund Advisors both have "smart" indices which reweight the S&P 500 on factors like profitability, dividend growth, price-to-free cash flow, etc. both have products that can be purchased in fund format to track those indices. 

Edited December 28, 2025 by TwoCitiesCapital

[Gregmal]

Perhaps it’s just me, but owning one of these index representative things is basically a mea culpa that acknowledges you have no interest in picking stocks or determining winners and losers. As such, it seems odd that the first move upon making such a mea culpa would be to declare that “I want to reduce exposure to the best, highest quality companies in the world. Let’s find something with more mediocre companies”….