ETF Spotlight: Equal-Weight S&P 500

Much has been made of the “lost decade” in stocks with the S&P 500 suffering a pair of major sell-offs in the dot-com bubble bursting in 2008 followed by the more recent credit meltdown. However, an exchange traded fund that equal-weights the S&P 500 has held up much better than the market-cap index that many investors use to measure the U.S. stock market.

According to a recent Bloomberg report, the market-cap weighted S&P 500 is down 19% since the end of the dot-com era in 2000. However, an equally-weighted index of S&P 500 components has gained 66% from March 24, 2000, through Dec. 2. [ETF Chart of the Day: S&P 500 Equal Weight]

Equal-weight equity ETF may help investors gain exposure to price movements in the smaller, more nimble components in a benchmark.

“Corporate America repaired itself,” Chris Hyzy, chief investment officer at U.S. Trust Co., said in the Bloomberg article. “On an equal-weighted basis, it hasn’t been a lost decade.”

Rydex SGI offers a suite of ETFs that follow the equal-weight methodology and was the first to launch an equal weight ETF back in 2003. The company is being acquired by ETF manager Guggenheim.

Rydex S&P Equal Weight ETF (NYSEArca: RSP) sports a three-year annualized return of 22%, compared with 15.3% for the S&P 500, according to Morningstar. 

“Since inception this fund has outpaced the market-weighted S&P 500. Equal-weighting’s boosters claim the strategy beats the market by eliminating market-weighting’s growth bias,” says Morningstar analyst Samuel Lee.

Sector equal-weight ETFs include:

  • Rydex S&P Equal Weight Consumer Discretionary ETF (NYSEArca: RCD): up 34.56% over the past three years.
  • Rydex S&P Equal Weight Consumer Staples ETF (NYSEArca: RHS): up 21.45% over the past three years.
  • Rydex S&P Equal Weight Energy ETF (NYSEArca: RYE): up 27.19% over the past three years.
  • Rydex S&P Equal Weight Financials ETF (NYSEArca: RYF): up 17.53% over the past three years.
  • Rydex S&P Equal Weight Health Care ETF (NYSEArca: RYH): up 21.13% over the past three years.
  • Rydex S&P Equal Weight Industrials ETF (NYSEArca: RGI): up 21.1% over the past three years.
  • Rydex S&P Equal Weight Materials ETF (NYSEArca: RTM): up 26.44% over the past three years.
  • Rydex S&P Equal Weight Technology ETF (NYSEArca: RYT): up 25.82% over the past three years.
  • Rydex S&P Equal Weight Utilities ETF (NYSEArca: RYU): up 15.02% over the past three years.

Rydex S&P Equal Weight ETF

For more information on equal-weight ETFs, visit our equal-weight ETFs category.

Read the disclaimer; Tom Lydon is a board member of the funds of Rydex|SGI.

Max Chen contributed to this article.

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