Before buying the Vanguard S&P 500 ETF, here are 3 others I would buy first

Invest in Vanguard S&P 500 ETF (NYSEMKT: VOL) is a smart way to secure your fair share of stock market returns.

Lowest exchange-traded fund (ETF) spending ratea strong history of close monitoring of the S&P500 and its simplicity make it attractive to new investors and seasoned veterans. Even Warren Buffett has money in the index fund.

However, many investors might consider diversifying beyond the S&P 500. The index is currently heavily concentrated in the stocks of just a few companies. Microsoft, NvidiaAnd Apple represent more than 20% of the index value, at the time of writing.

If you want to further diversify your portfolio, there are three ETFs that might be better options than continuing to purchase the Vanguard S&P 500 ETF.

1. Invesco S&P 500 Equal Weight ETF

The S&P 500 is full of some of the most valuable companies in the world. But if you invest in a regular index fund like the Vanguard S&P 500 ETF, you’ll end up owning mostly the biggest of the big. One way to correct this imbalance is to purchase an equal-weighted S&P 500 index fund like the Invesco S&P 500 Equal Weight ETF (NYSEMKT:RSP).

This Invesco ETF invests its assets equally among all constituents of the S&P 500. It rebalances once a quarter, ensuring that weightings never vary too far from equality. So even when Nvidia shares climb 50% in a quarter, the fund manager will sell some of it and reinvest the profits in underperforming stocks at the end of each quarter.

The equal-weighted index has historically outperformed the market-cap-weighted index. This has not been the case over the past decade as the performance of ultra-large-cap stocks has outpaced overall market returns. But over the long term, equal weighting benefits from increased investment in a wide range of companies.

The Invesco S&P 500 Equal Weight ETF will cost investors a little more than the Vanguard S&P 500 ETF. Its expense ratio is 0.2%. Still, it’s an inexpensive way to increase exposure to the 497 other S&P 500 companies other than Microsoft, Nvidia or Apple. And despite buying and selling shares every quarter, the fund has never distributed any capital gains to shareholders.

2. Vanguard Russell 2000 ETF

Although the S&P 500 is often used as a barometer of the entire market, the total stock market is much larger than the approximately 500 companies that make up the index. There are over 3,000 stocks available in the market.

You can invest in the entire stock market by purchasing a global index fund like Vanguard Total Stock Market ETF. But this index fund suffers from the same weighting issues as the S&P 500 ETF. Plus, the expected returns of the two are virtually the same.

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Instead, investing in a small-cap index fund can give you greater market exposure beyond the 500 largest companies. A small-cap segregated fund allows you to narrow down how much you invest in smaller companies compared to your overall portfolio.

THE Avant-garde…