To the naked eye, much of RSP’s lengthy performance advantage over cap-weighted S&P 500 ETFs is attributable to heftier allocations to small-caps and lower weights to mega-caps. In reality, rebalancing helps drive RSP’s performance advantage. Efficient rebalancing of equal-weight ETFs, either sector or broad market funds, not only drives returns, but also helps these ETFs steer clear of concentration risk. [Strategic Applications of Equal-Weight ETFs]
“RSP trades on average more than 800,000 shares on a daily basis and in our view has positive technical trends, above its 200-day moving average. The ETF trades with a tight $0.02 bid/ask spread. Year to date through September 29, RSP has risen 8.2%, modestly lagging SPY’s 8.5%. However, in 2012 and 2013, RSP outperformed by 117 and 322 basis points, respectively. Not surprisingly since RSP has smaller stakes in the less volatile mega-cap companies, RSP’s three-year standard deviation of 13.1 is higher than SPY’s 11.4,” according to S&P Capital IQ.
Guggenheim also features a lineup of nine equal-weight sector ETFs along with three equal-weight options for major benchmarks such as the Russell 2000 Index as well as the Guggenheim MSCI Emerging Markets Equal Weight ETF (NYSEArca: EWEM).
Guggenheim S&P 500 Equal Weight ETF
Tom Lydon’s clients own shares of RSP and SPY.