After another volatile trading session last night, the S&P 500 Index (SP: .INX) is trading at its lowest level in a year. 

The S&P 500, which represents America's 500 largest companies, fell another 1.7% last night to close at 4,982.77. The index is now down 18.9% from its all-time high of 6,144.15, reached in mid-February. It is also on the cusp of entering a bear market, defined as a decline of more than 20% from its recent peak. 

Several ASX exchange-traded funds (ETFs) provide ASX investors with exposure to America's 500 largest companies. Those wanting to increase their exposure to these companies should familiarise themselves with the differences between the ETFs, which could materially impact forward returns. 

Capitalisation-weighted vs equal-weighted

The first distinction concerns how the weights are chosen for each of the 500 companies. 

Like most ASX index ETFs, the iShares S&P 500 AUD ETF (ASX: IVV) is market capitalisation weighted. This means every holding is exactly proportional to its weighting in the S&P 500 Index. As of March 2025, its top five holdings are Apple Inc (7.00%), Microsoft Corp (5.85%), Nvidia Corp (5.57%), Amazon.com Inc (3.76%), and Meta Platforms Inc (2.65%). 

An alternative option is the equal-weighted version. The BetaShares S&P 500 Equal Weight ETF (ASX: QUS) holds the same 500 companies, except each holding carries an equal weighting. This means that the index's five largest companies each represent less than 0.3% of the ETF. The portfolio is rebalanced quarterly to maintain these weights. 

Over the past two years, the largest technology companies have outperformed the index. However, this year, those same companies have been among the biggest detractors. For example, Apple is down nearly 30%, while Tesla has fallen 42%.

Therefore, it's no surprise that the equally weighted QUS ETF has outperformed the market capitalization-based IVV ETF for the year to date. QUS has fallen 7.4%, compared to 11% for IVV.Investors who believe the largest US companies are now undervalued relative to the market should buy the IVV ETF. However, those who believe they will continue to underperform the market should go with the QUS ETF.

Hedged vs unhedged

Another consideration is currency. With the Australian dollar relative to the US dollar trading at below 60 cents for the first time since COVID, investors may be reluctant to invest in the US. The iShares S&P 500 (AUD Hedged) ETF (ASX: IHVV) provides exposure to the S&P 500 Index while mitigating currency risk for Australian investors. It is also market capitalisation weighted. 

For the year to date, the IHVV ETF is down 13.28%, underperforming the IVV ETF. However, if the Australian dollar were to strengthen, investors could benefit from buying IHVV units at today's price.

Foolish Takeaway

The S&P 500 Index hasn't traded this low in a year. Investors looking to invest in America's 500 largest companies may be looking at ASX ETFs. Those with a view on how the largest companies might perform from here, or on currency, should select their ASX ETFs accordingly.