Equal-weighted indexes have a distinct tilt toward value, and small- to midcap stocks. There are times when they've outperformed, and times they haven't.
This is the 20th anniversary of the launch of the Invesco S & P 500 Equal Weight ETF . The index weighs all 500 stocks in the S & P 500 equally, as opposed to the S & P 500, the modern version of which was launched in 1957 as a market-cap weighted index. Under the traditional system, stocks that have a higher market capitalization have a higher weighting in the index.
Everything else represents an active decision to do something different than owning the market and letting it do the heavy lifting." Which is better? Twenty years ago, before the triumph of indexing, this was largely an academic issue. Not anymore. With north of $7 trillion indexed to the S & P 500, and getting larger every year, there is an awful lot of passive money at stake.
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