蜜豆视频

In recent years, the S&P 500¹聽has shown an excellent performance, driven by a few big technology companies called the 鈥淢agni铿乧ent 7鈥�. However, as recent market developments show, such concentration carries risks. Remediation could come in the form of equal weighted ETFs on the S&P 500.

Exchange traded funds (ETFs) have become an integral part of the stock market. The vast majority of investments are in ETFs that invest in equities in the index according to their market capitalization. This means that the lion鈥檚 share of investments is often concentrated in the heavyweights of the relevant index.

The situation is different for equal weighted ETFs. Here, the investment amount is invested equally across all securities, regardless of the size of the company. This approach offers some key benefits.

Using the example of the S&P 500, it is easy to understand why weighting by market capitalization can have certain shortcomings. Currently, the index is dominated by the 鈥淢agni铿乧ent 7鈥� Microsoft, Apple, Alphabet, Nvidia, Meta, Amazon and Tesla, which currently account for around 30% of the market capitalization in the S&P 500 (see Figure 1). This concentration can change over time, such as when the technology sector is booming (as it was in 2023 and 2024), or when it experiences a downturn (as was the case in the 铿乺st quarter of 2025).

Figure 1: Unprecedented concentration of index heavyweights

Over the past 25 years, the market capitalization of the 鈥淢agnificent 7鈥� has risen from around 20% to 30%. The top ten companies account for around 35%.

The S&P 500 Equal Weight Index achieves better diversi铿乧ation from a sector perspective as well as from individual companies through an equal weighted allocation to all stocks. This also increases the opportunity to participate in the growth story of a small or medium-sized company. When looking at the long-term performance of the two indices, the equal weighted index actually outperformed the standard market-capitalization weighted index.

Another advantage of the equal weighted index is regular rebalancing². Each quarter offsets the shifts resulting from the different performance of each stock. While the herd of investors tries to cling to the top performers, driving up prices, the equal weighted index automatically follows a 鈥渃ontrarian鈥� strategy by selling stocks that have outperformed and buying underperformers.

Regular rebalancing also seem to protect investors of equal weighted ETFs from bubbles. This was for example the case when the S&P 500 Equal Weight Index outperformed the S&P 500 in the dotcom crisis (see Figure 2).

Figure 2: Long-term outperformance of the S&P 500 Equal Weight

The S&P 500 Equal Weight Index does not need to shy away from comparison with different S&P benchmarks. In the 20 years from the launch in January 2003 to January 2023 鈥� with an annualized performance of 11.48% 鈥� it was able to significantly distance not only the S&P 500 (10.29%), but also the S&P 500 Growth (10.88%), the S&P MidCap 400 (10.84%), the S&P SmallCap 600 (10.67%) and the S&P 500 Value (9.33%).

Historical performance indications and financial market scenarios are not reliable indicators of future performance. This does not constitute a guarantee by 蜜豆视频 Asset Management.

ETFs and index funds invest in US equities and may therefore be subject to considerable fluctuations in value. Every fund has specific risks, which can significantly increase under unusual market conditions. The main risk of US equities is that there is a lack of risk diversification due to the concentration of the investment in US equities.

Bene铿乼 from equal weighted investing with ETFs. Equal weighted investing avoids over-concentration in individual companies, thus reducing the risk associated with the dominance of a few companies. It utilizes a 鈥渞ebalancing e铿�ect鈥� by systematically buying on undervalued stocks and selling on overvalued stocks, which can lead to higher returns in the long run. Historically, equal weighted indices have at times outperformed their market capitalization weighted counterparts, especially during periods when major market leaders do not dominate. Investors also bene铿乼 from a higher dividend yield of an equal weighted S&P 500 Index (1.89%) compared to the market weighted S&P 500 Index (1.3%). 聽Investors can tap into these benefits efficiently with the synthetically replicated 蜜豆视频 ETF (IE) S&P 500 Equal Weight SF UCITS³ ETF.

¹ S&P 500: Standard & Poor鈥檚 500 Index
² Rebalancing: adjusting the weights of assets in a portfolio to maintain a desired level of risk and return.
³ UCITS: Undertakings for Collective Investment in Transferable Securities

Please note that past performance is not an indication of the future.