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The S&P 500 is comprised of the 500 largest U.S. listed stocks, is one of the most widely followed benchmarks in the world and is generally a good indicator of the health of the U.S. economy. No wonder exchange traded funds that track it are among the largest and most heavily traded investment vehicles.

The largest ETF in the market, at a market-cap of about $41 billion, the SPDR S&P 500 Trust (NYSEARCA:SPY) is the most well known fund that tracks the S&P 500, but there are many others like it. In addition to tracking the famous benchmark, these ETFs also include special characteristics which enable them to sometimes outperform the benchmark.

The first on the list is the ProShares Credit Suisse 130/30 (NYSEARCA:CSM), which tracks a benchmark that established either long or short positions in S&P 500 equities by applying rules-based rankings and weighting methodology. The fund establishes a 100% long position in the S&P 500, then sells 30% of the value of the portfolio in holdings that are expected to decline in value and then uses the proceeds from its sales to establish long positions in holdings that are expected to outperform. Since its inception, it has outperformed the S&P 500.

Next on the list is the RevenueShares Large Cap Fund (NYSEARCA:RWL) which maintains similar holdings to the S&P 500 but utilizes a top-line revenue approach, as opposed to a market-cap approach, to determine the weightings given to each holding. This strategy often results in the ETF investing heavily in companies with a low price-to-revenue ratio which can result in a significantly different composition.

The Rydex S&P Equal Weight ETF (NYSEARCA:RSP) maintains nearly identical holdings to the S&P 500, but gives an equal weighting to each individual stock, 0.20% to each of the 500 stocks. Utilizing this strategy makes it less likely to overweight overvalued stocks and underweight undervalued stocks. RSP's top 10 holdings account for a mere 2.5% of its asset base as compared to nearly 20% for SPY ‘s ten largest holdings.

Lastly, there is the WisdomTree Earnings 500 Fund (NYSEARCA:EPS), which is based on a benchmark that measures the performance of the earnings-generating companies within the large-cap segment of the U.S. stock market. One eligibility requirement to be included in the ETF is that a company must be incorporated in the U.S. and have posted positive earnings in each of its previous four fiscal quarters. Naturally, larger weightings are given to companies with higher earnings and companies that are included in the S&P 500 with negative earnings are not even considered.

These deviations and strategies taken by the aforementioned ETFs seem to be innovative and unique and some have resulted in an outperformance when measured up against the S&P 500.

Source: Playing the S&P 500 With ETFs