Equal weight is a type of proportional measuring method that gives the same importance to each stock in a portfolio, index, or index fund. So stocks of the smallest companies are given equal statistical significance, or weight, to the largest companies when it comes to evaluating th💎e overall group's performance.

An equal-weight index is also known as an 澳洲幸运5官方开奖结果体彩网:unweighted index.

Understanding Equal Weight

Equal weight differs from the method more commonly used by indexes, funds, and portfolios in which stocks are weighted based on their 澳洲幸运5官方开奖结果体彩网:market capitalization.

Many of the largest and most well-known market indices are either 澳洲幸运5官方开奖结果体彩网:market capitalization-weighted or price-weighted. Market-cap-weighted indices, such as the Standard & Poor's (S&P) 500, give greater weight to the biggest companies according to market capitalization. Large-caps such as Apple and Microsoft are among the biggest holdings in the S&P 500. Price-weighted indices, such as the 澳洲幸运5官方开奖结果体彩网:Dow Jones Industrial Average (DJIA), give larg💙er weightings to stocks with higher stock prices.

The concept of equally-weighted portfolios has gained interest due to the historical performance of small-cap stocks and the emergence of several 澳洲幸运5官方开奖结果体彩网:exchange-traded funds (ETFs). 澳洲幸运5官方开奖结果体彩网:Standard & Poor's h🏅as developed more than🤡 80 different equal-weight indices based on combinations of market cap, market, and sector.

Performance of Equal-Weighted Indices

Small-cap stocks are generally considered to be higher risk, higher potential return investments compared to large-caps. In theory, giving greater weight to the smaller names of the S&P 500 in an equal-weight portfolio should increase the return potential of the portfolio. Historically, this has been the case—in the short term. From September 2020 to September 2021, the total one-year return for the S&P 500 Equal Weight Index (EWI) was 41.93%, vs. 33.72% for the traditional 澳洲幸运5官方开奖结果体彩网:S&P 500 Index.

However, over the long term, the gap narrows—and in fact, the returns flip. The 10-year annualized total return (September 2019-September 2021) for the S&P 500 Equal Weight Index was 15.32%, but the S&P 500 outperformed it, returning 16.32%.

Examples of Equal-Weight Funds

Invesco offers more than a dozen different equal-weight funds covering not only major indices such as the S&P 500 but also many of the market's major sectors. The Invesco S&P 500 Equal Weight ETF (RSP), for example, provides the same exposure to the smallest companies in the S&P 500 as it does to corporate giants such as General Electric.

Other examples of equal-weight index ETFs include the Invesco Russell 1000 Equal Weight ETF, which is based on the Russell 1000 Equal Weight Index, and the First Trust NASDAQ-100 Equal Weighted Index Fund, which uses the NASDAQ-100 Equal Weighted Index as its benchmark.