ETF Spotlight on Rydex S&P Equal Weight (RSP), part of a weekly series.
Assets: $1.1 billion
Holdings: Among this fund’s components are Expedia (EXPE), Office Depot (ODP), Tenet Healthcare (THC) and Wyndham Worldwide (WYN). The top sector weighting is consumer discretionary, at 16.3%. Financials are 15.7%, information technology is 14.9% and industrials are 11.6%.
RSP tracks the S&P Equal Weight Index, which is an equally weighted index made up of components in the S&P 500. To maintain this equal weighting, the index rebalances on a quarterly basis.
- Why equal weight? The S&P 500 is a market cap weighted index, meaning that the largest companies get the biggest percentage of the weighting. This can lead to those companies having an outsized influence on the index’s direction. By using equal weight, all stocks are on a level playing field.
- Weighting an index with this strategy can give an investor more small- and mid-cap exposure, which can be appealing in recovery climates when smaller stocks have historically tended to outperform.
- The different weighting methods can result in different sector exposures than the original index.
- Another benefit of equal weighting is that no stock can become too big and sink the whole ship.
The Latest News
- RSP has been outperforming the S&P 500 year-to-date. It’s up 23% vs. the S&P, which is up 10.3%.
- As the economy recovers, small- and mid-caps have been outperforming large caps, which gives the equal weight strategy a chance to shine.
Read the disclaimer, as Tom Lydon is a board member of Rydex Funds.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.