ETFdb Logo
ETFdb Logo
  • ETF Database
  • Channels
    • Active ETF
    • Beyond Basic Beta
    • China Insights
    • Climate Insights
    • Commodities
    • Core Strategies
    • Crypto
    • Direct Indexing
    • Disruptive Technology
    • Energy Infrastructure
    • ETF Building Blocks
    • ETF Education
    • ETF Strategist
    • Financial Literacy
    • Fixed Income
    • Gold/Silver/Critical Minerals
    • Innovative ETFs
    • Institutional Income Strategies
    • Leveraged & Inverse
    • Managed Futures
    • Market Insights
    • Modern Alpha
    • Night Effect
    • Portfolio Strategies
    • Responsible Investing
    • Retirement Income
    • Richard Bernstein Advisors
    • Tax Efficient Income
    • Volatility Resource
  • Tools
    • ETF Screener
    • ETF Country Exposure Tool
    • ETF Sector Tracker Tool
    • ETF Database Categories
    • Head-To-Head ETF Comparison Tool
    • ETF Stock Exposure Tool
    • ETF Issuer Fund Flows
    • Indexes
    • Mutual Fund To ETF Converter
  • Research
    • ETF Education
    • Equity Investing
    • Dividend ETFs
    • Leveraged ETFs
    • Inverse ETFs
    • Index Education
    • Index Insights
    • Top ETF Sectors
    • Top ETF Issuers
    • Top ETF Industries
  • Webcasts
  • Themes
    • AI ETFs
    • Blockchain ETFs
    • See all Thematic Investing ETF themes
    • ESG Investing
    • Marijuana ETFs
  • Multimedia
    • ETF 360 Video Series
    • ETF of the Week Podcast
    • ETF Prime Podcast
    • Video
  • Company
    • About VettaFi
    • Get VettaFi’ed
  • PRO
    • Pro Content
    • Pro Tools
    • Advanced
    • FAQ
    • Pricing
    • Free Sign Up
    • Login
  1. Portfolio Strategies Channel
  2. Remove Size Bias With This ETF
Portfolio Strategies Channel
Share

Remove Size Bias With This ETF

Elle CarusoJul 21, 2022
2022-07-21

The S&P 500 EWI is designed to remove size bias from the S&P 500. 

The S&P 500 EWI, which is tracked by the Invesco S&P 500® Equal Weight ETF (RSP B+), includes the same constituents as the cap-weighted S&P 500, but each company in the S&P 500 EWI is allocated the same weight at each quarterly rebalance.

An equal-weight strategy is favored for providing diversification benefits and reducing concentration risk by weighting each constituent company equally so that a small group of companies does not have an outsized impact on the index. 

Equal-weight indexes also regularly outperform their market cap-weighted counterparts. The S&P 500 EWI outperformed the S&P 500 by 2% in the first half of the year, according to S&P Dow Jones Indices.

While equal weight provides unique exposure and has historically demonstrated outperformance, cap-weighting remains more popular because it is what most investors are familiar with.

Nick Kalivas, head of factor and core equity product strategy, ETFs & indexed strategies, Invesco, said cap weighting is popular because it’s very inexpensive, and it’s the benchmark — investors, both retail and institutional, will naturally flow into cap-weighted products when adding equity exposure. 

Kalivas added that diversification is a significant benefit of equal weighting. “When you look at the S&P 500, the top 10 names finished last year with about 30% of the index. So you’ve got this really, really big concentration, and I think when people are investing, they’re not thinking about putting that much of their money in just a handful of names and so they’re thinking more broadly — and that’s what really equal weight offers,” Kalivas said.

The S&P 500 has increasingly become more concentrated. Kalivas added that the weight overlap between the S&P 500 and the Nasdaq 100 has doubled in the past 10 years. 

“It finished last year with around 42% overlap, so you’ve seen this kind of growth drift happen in the S&P 500,” Kalivas said. “I think if you’re thinking about making the core of your portfolio, you probably want something that’s just more generally representative equity, and you can get your growth through another ETF or whatever vehicle you want… So, I think for that reason, RSPs got a lot of benefit as being the anchor — kind of your base equity exposure.”

For more news, information, and strategy, visit our Portfolio Strategies Channel.

Loading Articles...
Our Sites
  • VettaFi
  • Advisor Perspectives
  • ETF Trends
Tools
  • ETF Screener
  • Mutual Fund to ETF Converter
  • Head-To-Head ETF Comparison
  • ETF Country Exposure Tool
  • ETF Stock Exposure Tool
  • ETF Database Pro
More Tools
  • Financial Advisor & RIA Center
Explore ETFs
  • ETF News
  • ETF Category Reports
  • Premium Articles
  • Alphabetical Listing of ETFs
  • Browse ETFs by ETF Database Category
  • Browse ETFs by Index
  • Browse ETFs by Issuer
  • Compare ETFs
Information
  • Contact Us
  • Terms of Use and Privacy Policy
  • © 2023 VettaFi LLC. All rights reserved.

Advertisement

Is Your Portfolio Positioned With Enough Global Exposure?

ETF Education Channel

How to Allocate Commodities in Portfolios

Tom LydonApr 26, 2022
2022-04-26

A long-running debate in asset allocation circles is how much of a portfolio an investor should...

Core Strategies Channel

Why ETFs Experience Limit Up/Down Protections

Karrie GordonMay 13, 2022
2022-05-13

In a digital age where information moves in milliseconds and millions of participants can transact...

}
X