2025 may yet produce another strong year for markets, but the challenge for investors remains leaning into the right ideas. Will tech continue to dominate, or will its oversized role in portfolios come back to haunt investors? Could investors be right to underweight more blasé segments like utilities, or could those firms play a bigger role in the new year? Diversification doesn’t have to be painful, and can actually offer upside, in a straightforward equal weight ETF like EQL.
See more: Look to Quality ETF OUSM to Lead the Way into 2025
The ALPS Equal Sector Weight ETF (EQL ) launched back in 2009. Charging 25 basis points (bps), the strategy tracks the NYSE Select Sector Equal Weight Index. In doing so, the equal weight ETF looks to equally weight each economic sector. That sets it at odds with the market-cap weighting approach favored by the largest indexes. To craft that equal weight, EQL splits its assets across the various SPDR sector funds, like, for example, the Financial Select Sector SPDR Fund (XLF).
Equal Weight ETF Positivity
The equal weight ETF has taken that approach and run with it, returning 13.6% since inception per SS&C ALPS Advisors data as of September 30th. Over the last year, it returned 29.5%, as well. So, what role might it perform in portfolios?
With rate cuts still seeing their impact filter through the financial system, positive trends do exist entering 2025. Deregulation, and the final stages of a so-called “soft landing” from last year could position the overall economy and market to do well. Of course, risks also loom, perhaps most important among them concentration risk. Many investors’ portfolios have relied overwhelmingly on just a few firms and few sectors, with tech key.
Getting equity exposure outside of tech in one ETF can help. With 2025 starting off relatively positive, EQL offers a more cautious way to get domestic diversification with potential upside from other sectors.
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