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Equal Weight ETFs


I have read your option on Factor ETFs.  What is your opinion on equal weight funds?  Specifically a S&P 500 equal weight ETF.  Is there something logical to buying an even amount of the 500 largest stocks so that you are always buying more of the laggard stocks and fewer of the stocks that have run up?  Or is that just doubling down on losers?

Hi @jalanlong,

An equal weight fund benefits from being more overweight small cap stocks. So, they're a bit higher risk than a market cap weighted ETF, but they're also likely to generate a bit higher returns. So it really comes down to fees. If the EW fund is a lot more expensive than a market cap weight allocation you could create then it makes no sense to invest in the EW fund. Frankly, I don't love EW funds as they seem to create complexity where it's unnecessary.

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