With Apple (NasdaqGS: AAPL) stock down more than 10% this morning after the company’s quarterly earnings report, this brings the topic of equal weighted versus market cap weighted ETFs to mind once again.
AAPL is the top holding in the $32 billion ETF, PowerShares QQQ (NasdaqGM: QQQ), Expense Ratio 0.20%, which tracks the Nasdaq 100 Index, weighing in most recently at approximately 15.23%.
Those who watched AAPL’s steep climb to as high as $701.86 last September, no doubt recall a higher weighting in the 18-19% range due to the basic dynamics of a cap weighted index approach (price of stock multiplied by shares outstanding), and the fact that cap weighted indexes largely re-balance by attrition, as there is no systematic re-balance.
Throughout last summer and continuing into the winter, we have documented the AAPL saga rather regularly, in pieces such as these links:
Funds with similar AAPL heavy exposure include IYW (iShares D.J. U.S Technology, Expense Ratio 0.48%), VGT (Vanguard Information Technology, Expense Ratio, 20.49%), and XLK (SPDR Technology Select, Expense Ratio 0.18%) to name a few and these are all structured with market capitalization weighted index methodologies. [Equal-Weighted Tech ETFs]