Simple. Effective. Equal-weight.

[5 min read, open as pdf for full article]

• A straightforward approach to reduce concentration risk
• Reduces “the big get bigger” effect of cap-weighted “passive” indices
• Scope for outperformance relative to traditional indices

Critics of tracker funds often flagged concentration risk or the “big get bigger” approach of passive investing as a structural flaw to index investing.  But concentration risk is a choice, not an obligation for the index investor.

​As would be expected, an equal weight approach has proved relatively more defensive in the down-market year-to-date.  The S&P500 Equal Weight index has returned -5.2% against the traditional S&P 500’s -9.3% YTD, in GBP terms.

For more on this topic, please see our CISI-endorsed CPD webinar:
The curious power of equal weight, with guest speaker Tim Edwards, Managing Director, Index Investment Strategy, S&P Dow Jones Indices