Invesco Canada blog

Insights, commentary and investing expertise

Christopher Doll | October 4, 2018

The S&P 500 Equal Weight Index moves north

Investors seeking exposure to U.S. large cap stocks have many options, but often may not be aware of the concentration risk they may be taking on through an S&P 500-indexed ETF.

Because the underlying index is market-cap-weighted, an ETF tracking it will have a large overweight to a handful of very large companies. Conversely, the smallest companies in the index will have near-inconsequential weights.

One approach to mitigate this concentration risk is to break the link between market capitalization and portfolio weighting. An equal-weight index is seeking  to do that, by providing an investor with a more balanced approach to the companies that make up the S&P 500.

In fact, the S&P 500 Equal Weight Index has a well-established track record of outperformance versus the cap-weighted S&P 500 Index1. It also serves as the underlying index for Invesco S&P 500 Equal Weight Index ETF (EQL), which we launched in May of this year.

I recently discussed the merits of equal-weighting the S&P 500 with James Garcelon, Executive Vice-President at Shaunessy Investment Counsel, and Randall O’Leary from S&P Dow Jones Indices.

 

Click here to watch the interview with Christopher Doll.

 

 

 

 

 

 

 

 

 

 

 

 


Learn more about Invesco S&P 500 Equal Weight Index ETF (EQL)

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1 Sources: Based on the performance of the S&P 500 Equal Weight Index’s over January 8, 2003 (inception) to April 30, 2018.

S&P®, Standard & Poor’s® and S&P 500 Equal Weight® are registered trademarks of Standard & Poor’s Financial Services LLC and have been licensed for use by S&P Dow Jones Indices LLC. The S&P Equal Weight Index is a product of S&P Dow Jones Indices LLC and has been licensed for use by Invesco Canada Ltd. This Invesco ETF is not sponsored, endorsed, sold or promoted by S&P Dow Jones Indices LLC, and S&P Dow Jones Indices LLC makes no representation regarding the advisability of investing in such a product.

Commissions, management fees and expenses may all be associated with investments in exchange-traded funds. Exchange-traded funds are not guaranteed, their values change frequently and past performance may not be repeated. Please read the prospectus before investing. Copies are available from Invesco at www.invesco.ca.

There are risks involved with investing in ETFs, including the risk of error in replicating the underlying Index. Please read the prospectus for a complete description of risks relevant to the ETF. Ordinary brokerage commissions apply to purchases and sales of ETF units.

Each Invesco ETF seeks to replicate, before fees and expenses, the performance of the applicable Index and is not actively managed. This means that the Sub-advisor will not attempt to take defensive positions in declining markets but rather continue to hold each of the securities in the Index regardless of whether the financial condition of one or more issuers of securities if the Index deteriorates

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