It might be hard to believe there are exchange-traded funds (ETF) better than the Magnificent 7, which are up nearly 14% year-to-date. However, some top-notch ETFs consistently beat the S&P 500 over the long haul while providing more growth opportunities.

Moreover, the S&P 500’s present composition lacks diversification due to a heavy slant toward the Magnificient 7. Today, those seven stocks account for 30% of the index, meaning the remaining 495 tickers do little for performance on the upside while holding it back on the downside. 

Which ETFs are better for diversification than the S&P 500? One suggestion would be equal-weighted funds, where the holdings are reset every quarter, with every holding starting the quarter with the same weight.

Here are three ETFs to help hedge against a lack of diversity in the major indexes.

Pacer US Cash Cows 100 ETF (COWZ)

One of the more attractive ETFs on the market is Pacer US Cash Cows 100 ETF (BATS:COWZ). The fund represents a quality passive investment built from companies with strong free cash flow. For me, this metric constitutes the most critical attribute of a healthy company. As such, over the past five years, COWZ has generated a cumulative return of 86.72%, 1,092 basis points higher than the S&P 500. 

To achieve this, the index starts with all the companies from the Russell 1000 Index. Those companies’ average free cash flow yield is 3.15%, with a 24.67 price-to-earnings ratio. It then selects the top 100 free cash flow yields from the trailing 12 months. These companies have a free cash flow yield of 8.33% with an 11.14x P/E. 

Finally, it weights those 100 stocks based on their free cash flow, which ensures larger, more stable companies get higher weightings. Each stock can account for no more than 2% of the index. As such, investors should keep a close eye on ETFs better than the Magnificent 7 stocks like COWZ.

It’s a winning process.

Vanguard Mega Cap Growth ETF (MGK)

Vanguard Mega-Cap Growth ETF (NYSEARCA:MGK) has outperformed most ETFs over the past five years, including COWZ. It’s up more than 121%, making it look quite attractive. Furthermore, if you consider stock performance over the past five years, large-caps have outperformed small-caps, so the returns achieved by MGK make sense.  

“According to Morningstar, the Russell 2000 has risen an annualized 25.2 percent during periods of increasing growth and slowing inflation since the 1970s, outpacing the S&P’s 17.3 percent annualized gain in such environments,” stated Institutional Investor in January.  

MGK tracks the performance of the CRSP US Mega Cap Growth Index, a collection of 82 stocks with a median market capitalization of $1.3 trillion. Because it’s focused on growth stocks, the average holding has a P/E of 38.3x and a price-to-book of 10.8.

Technology represents the largest weighting at 58.70%, with consumer discretionary (21.20%) and industrials (7.30%) among the top three sectors.  At a 0.07% expense ratio, it’s a low-cost fund to buy for the long haul. 

SPDR Portfolio S&P 500 Value ETF (SPYV)    

SPDR Portfolio S&P 500 Value ETF (NYSEARCA:SPYV) is a nice fund to own to complement the growth of MGK. Yet, it can be hard to tell the difference between the two strategies. 

SPYV tracks the performance of the S&P 500 Value Index, a collection of 442 stocks from the S&P 500 exhibiting value characteristics such as low P/Es, P/Bs, and price-to-sales. However, it exhibits the lowest performance of the three ETFs mentioned in this article. That makes sense, given value stocks have been out of fashion for over a decade.  

Despite this, the fund’s low fees (0.04%) have attracted nearly $21 billion in net assets, which could suggest a value stock comeback. The fund’s top three sectors by weight are financials (22.60%), health care (18.17%), and industrials (11.56%). Berkshire Hathaway (NYSE:BRK-B) is the top holding at 3.81%. It also helps that Morningstar gives it a five-star rating. 

On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.