Diversify Beyond AI: 3 ETFs for Risk-Conscious Investors in 2025

Why Tech Concentration Poses Real Portfolio Risk

The artificial intelligence boom has fundamentally reshaped market dynamics. While AI stocks have delivered extraordinary gains, they’ve also driven unprecedented concentration in the S&P 500. This creates a paradox: the index traditionally viewed as a safe, diversified benchmark now carries elevated exposure to a single sector. For investors uncomfortable with this imbalance, alternative strategies exist.

The solution? Exchange-traded funds that offer broad market participation while deliberately limiting tech exposure. Three standout options each address this challenge differently: Vanguard High Dividend Yield Index Fund ETF (NYSEMKT: VYM), Invesco S&P 500 Revenue ETF (NYSEMKT: RWL), and State Street Consumer Staples Select Sector SPDR ETF (NYSEMKT: XLP).

Strategy 1: Income-Focused Diversification Through the Vanguard High Dividend Yield Index Fund

For investors seeking both stability and cash flow, the Vanguard High Dividend Yield ETF presents a compelling approach. The fund’s defining characteristic is its yield advantage—currently delivering 2.4%, more than double the broader S&P 500’s 1.1% yield.

Its portfolio structure demonstrates meaningful sector balance. With 566 holdings, the fund achieves genuine diversification, though financial services dominate at 21% of assets. Tech represents only 14% of holdings, with Broadcom comprising nearly 9% of the total portfolio as its single largest position and the lone tech giant in the top five.

Performance metrics support this conservative positioning. Year-to-date returns reached 13%, while the expense ratio of just 0.06% ranks among the industry’s lowest. This combination of dividend income, valuation support, and minimal costs makes the fund particularly attractive for risk-averse portfolios.

Strategy 2: Revenue-Weighted Alternative to Traditional Market Cap Indexing

The Invesco S&P 500 Revenue ETF fundamentally rethinks index construction. Rather than weighting holdings by market capitalization—which concentrates influence among the largest, often most expensive stocks—this ETF allocates based on company revenue.

This methodological shift produces a dramatically different portfolio composition. Instead of market-cap leaders like Microsoft and Nvidia dominating the top positions, revenue-weighted analysis elevates companies like Walmart, McKesson, and UnitedHealth. The result: tech stocks account for just 12% of total holdings, while healthcare emerges as the largest sector at 21%.

This year’s performance demonstrates the benefit of this approach. The Invesco ETF has advanced 17% while providing a 1.3% dividend yield. The 0.39% expense ratio, while higher than core index funds, reflects the value of its reconstituted methodology for tech-averse investors.

Strategy 3: Maximum Defensiveness Through Consumer Staples Focus

For investors seeking complete elimination of technology sector risk, the State Street Consumer Staples Select Sector SPDR ETF offers a specialized approach. This fund concentrates exclusively on consumer staples—companies selling everyday essentials that sustain consistent demand regardless of economic conditions.

Its top holdings—Walmart, Costco Wholesale, and Procter & Gamble—comprise approximately 29% of assets and represent the blue-chip quality investors expect during market stress. These dividend-paying corporations historically provide portfolio ballast when broader markets weaken.

Though year-to-date gains remain modest at under 1%, the 2.7% yield substantially supplements price appreciation. Should market concerns about artificial intelligence valuations prompt investor repositioning toward defensive sectors, this fund’s appeal could strengthen considerably. Even without significant price gains, the fund delivers a diversified basket of consumer brands at a minimal 0.08% expense ratio.

Making Your Decision

These three ETFs offer graduated approaches to tech exposure reduction. The Vanguard fund balances income with modest growth. The Invesco alternative applies revenue-based logic to traditional equity indexing. The State Street option eliminates tech risk entirely through sector specialization. Your selection depends on your risk tolerance and income requirements in an environment where artificial intelligence concentration raises legitimate portfolio concerns.