An equal-weight index exchange traded fund has consistently outperformed the broader S&P 500, capitalizing on smaller company exposure in the equal weighting methodology.

The Guggenheim S&P 500 Equal-Weight ETF (NYSEArca: RSP) has generated an average annualized return of 9.5% over the past 10 years, whereas the SPDR S&P 500 ETF (NYSEArca: SPY) gained an annualized 7.4%. Year-to-date, RSP is up 28.0% while SPY increased 24.3%. [What an Equal-Weight S&P 500 ETF Brings to the Table]

The equal weight methodology, like the name suggests, equally weights underlying holdings so that each company has an equal affect on the overall performance of the portfolio. In contrast, the market-capitalization weighted S&P 500 index will lean toward large, well-established names.

For instance, looking at the allocations in market capitalization, SPY holds 51.1% in mega-caps, 37.2% in large-caps and 11.7% in mid-caps. In contrast, RSP allocations include mega-caps 12.0%, large-caps 43.9% and mid-caps 43.7%.

However, considering the emphasis on smaller companies in RSP, Gary Gordon on ETF Expert believes that the equal-weight ETF captures what a traditional market-cap weighted index for smaller companies might reflect. Specifically, the iShares Russell 200o ETF (NYSEArca: IWM) has gained an average annualized 9.2% in the past 10 years compared to RSP’s 9.5% return.

Nevertheless, equal-weight enthusiasts can still consider the Guggenheim Russell 2000 Equal Weight ETF (NYSEArca: EWRS), which places a heavier tilt toward micro-cap stocks. EWRS, though, is relatively new and does not have a long-term track record like the other funds.