By Michael Johnston, founder of ETF Database.

The S&P 500 is one of the most widely followed benchmarks in the world, a bellwether of the U.S. economy that is included in the Index of Leading Indicators. Composed of 500 of the largest stocks listed in the U.S. (as well as a handful of non-U.S. companies), the index has a weighted average market capitalization of approximately $80 billion and includes companies across all sectors of the economy.

With the rise of indexing as an investment strategy, it's not surprising that exchange-traded funds designed to track the S&P 500 are among the largest and most heavily traded ETFs. With a market capitalization of more than $57 billion, the SPDR S&P 500 ( SPY) is by far the largest ETF, nearly $20 billion larger than its closest competitor. The iShares S&P 500 Index Fund ( IVV) comes in at No. 4 on the list with almost $21 billion in assets, meaning that U.S. investors have nearly $80 billion invested in S&P 500 ETFs.

Although the SPY and IVV are by far the most popular ways to play the S&P 500, they're not the only games in town. There are a number of exchange-traded products that offer similar risk and return profiles but also feature twists that in some cases allow them to outperform the popular benchmark by a wide margin.

ProShares Credit Suisse 130/30 ( CSM)

This ETF employs a 130/30 strategy that has been popular with investors for some time but is new to ETFs. The CSM tracks the Credit Suisse 130/30 Large-Cap Index, a benchmark that establishes either long or short positions in S&P 500 equities by applying a rules-based ranking and weighting methodology. This fund essentially 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 underperform. It then uses the proceeds of those sales to establish long positions in holdings that are expected to outperform.

Because the end result is 100%-net-long exposure, CSM maintains a similar risk and return profile as the S&P 500, but uses quantitative analysis to attempt to beat the benchmark. CSM is a relatively new fund, but it is certainly off to a hot start. Since its inception in July, it has gained almost 21%, about 100 basis points more than SPY over the same period.

RevenueShares Large Cap Fund ( RWL)

This is one of four ETFs from RevenueShares that maintains similar holdings to popular market capitalization-weighted indexes but uses top-line revenue (not market cap) to determine the weightings given to each holding. By using revenue to determine the weight given to each security, RevenueShares products invest more heavily in companies with a low price-to-revenue ratio and underweight those with a higher ratio. This strategy can also avoid changing allocations to companies based on corporate actions such as preferred stock redemptions, as happened with Citigroup ( C) earlier this year.

As shown below, weighting individual holdings by revenue can lead to a significantly different ETF composition. (All weightings are as of Oct. 23, 2009.)
SPY v RWL
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Source: ETF Database

It is also interesting to note that Ford Motor ( F) is the second largest holding in RWL at 3.2%, while this stock makes up less than 0.3% of SPY.

PowerShares S&P 500 BuyWrite Portfolio ( PBP)

This ETF is based on the CBOE S&P 500 BuyWrite Index, a benchmark that implements a "covered call" strategy on the S&P 500. Similar to 130/30 strategies, covered-call funds are nothing new to investors, but they are relatively new to ETFs. (The PBP was launched in December 2007.)

The strategy implemented by this ETF consists of holding a portfolio indexed to the S&P 500 and selling a succession of options with an exercise price above the prevailing level of the S&P 500. If the S&P remains flat or rises slightly (to a level below the exercise price of the options), investors collect the premium on the options that expire out of the money. Similarly, if the S&P falls, the premiums collected by the covered call strategy soften the blow.

The downside of this ETF strategy is its performance in a bull market. Because investors will be on the hook to those who took a long position in the written options, the upside potential of a covered-call portfolio is limited. So PBP might be a good play for investors expecting a sideways market or looking to establish some degree of downside protection.

Rydex S&P Equal Weight ETF ( RSP)

RSP maintains nearly identical holdings to the S&P 500 but, as its name implies, gives an equal weighting to each individual stock (0.20% to each of the 500 equities). As of Oct. 23, RSP's largest holdings were Gannett ( GCI) (0.27%), Amazon.com ( AMZN) (0.26%) and New York Times ( NYT) (0.25%). RSP's top 10 holdings account for about 2.5% of total holdings, compared to about 20% for SPY's 10 biggest allocations. The equal weighting strategy avoids one potential pitfall of market capitalization-weighted indices: By giving each stock the same weighting, it is less likely to overweight overvalued stocks and underweight undervalued companies.

This strategy results in much bigger allocation to consumer discretionary stocks for RSP. This sector accounts for almost 16% of the equal-weighted ETF but only about 9% of SPY.

WisdomTree Earnings 500 Fund ( EPS)

This ETF is based on the WisdomTree Earnings 500 Index, a benchmark that measures the performance of the earnings-generating companies within the large-cap segment of the U.S. stock markets. To be eligible for inclusion in the index, companies generally must be incorporated in the U.S. and have positive earnings over their last four fiscal quarters. Larger weightings are given to the companies with the highest earnings.

Since not all components of the S&P 500 have positive earnings (particularly not over the last four quarters), the holdings of EPS may vary slightly. As of Oct. 23, the 10 biggest holdings of SPY all had material allocations in EPS as well, but the percentages varied significantly in some cases.
SPY vs EPS
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Source: ETF Database

Relative Performance

Most of the "tweaks" these ETFs apply to the S&P 500 seem relatively minor. But they can have a big impact on performance. As shown below, the year-to-date of these. (Note that CSM isn't included because it was launched in July, but as noted above, this ETF has outperformed the S&P 500 since its inception).
SPY vs EPS
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Source: ETF Database
At the time of publication, Johnston was long IVV.

Michael Johnston is the senior analyst and founder of ETF Database, a Web-based investment resource providing actionable ETF investment ideas and an ETF Screener for investors analyzing potential ETF investments. Johnston oversees ETF Database's free ETF Newsletter, one of the most popular sources for news and commentary focusing exclusively on the exchange-traded fund industry. Johnston also maintains and develops content for ETFdb Pro, a line of analyst reports and model portfolios designed to help investors utilize ETFs to meet their investment goals.

Johnston has completed the Chartered Financial Analyst (CFA) program, and obtained his bachelor's degree in finance from the University of Notre Dame. Prior to founding ETF Database, Michael worked in a private client service group performing valuations of companies operating in a wide range of industries.