For instance, the Guggenheim S&P 500 Equal-Weight ETF (NYSEArca: RSP) has generated an average annualized return of 9.4% over the past 10 years, whereas the S&P 500 index gained an annualized 7.5%. Year-to-date, RSP is up 29.5% while the S&P 500 increased 26.4%. [Why Equal Weight ETFs Outperform Traditional Benchmarks]
Lazzara attributes the outperformance to three factors: average capitalization of equal-weight portfolios are less than cap-weighted counterparts, equal-weight portfolios typically lean toward value over growth and the index rebalances by selling winners and buying losers in a market where mean reversion occurs.
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