Strategic Thinking With Equal-Weight ETFs

“Some sectors lend themselves to being better as equal-weight,” notes Belden, highlighting the example of technology being a sector that works well in the equal-weight mold while the same cannot always be said of the large cap-dominated materials group.

Belden is correct in his assessment of tech as a good equal-weight play. The $625.1 million Guggenheim S&P Equal Weight Technology ETF (NYSEArca: RYT) proved its utility to investors two years when ago Apple (NasdaqGS: AAPL), stinging investors in ETFs with double-digit allocations to the iPhone maker. [ETFs for Nervous Apple Fans]

Of course, RYT can lag cap-weighted peers when Apple is surging, but sometimes avoiding a sector’s largest stocks can work well for investors. For example, Exxon Mobil (NYSE: XOM) and Chevron (NYSE: CVX), the two largest U.S. oil companies, often hold dominant positions in cap-weighted energy ETFs.

The $226.2 million Guggenheim S&P Equal Weight Energy ETF (NYSEArca: RYE) allocates a combined 4.6% of its weight to Exxon and Chevron, a trait that has helped RYE outpace cap-weighted rivals over the past 24 months.

Guggenheim S&P Equal Weight ETF

Tom Lydon’s clients own shares of Apple and RSP.