Traditional Equal Weighting May Not Be as Diversified as You Think

EXHIBITS:

Figure 1: S&P 500 Equal Weight Index – Sector Composition through time

Figure 2: Russell 1000 Sector Allocation Comparison

Russell 1000 Sector Allocation Comparison

Important Information

The Russell Global Sector classification system categorizes stocks into nine sectors: technology, health care, consumer discretionary, consumer staples, energy, materials and processing, producer durables, financial services and utilities.

As the index rebalances back to base weights, it increases weight in those sectors/stocks that have decreased in price while decreasing weight in those sectors/stocks that have increased in price — thus contra-trading against recent market movements.

The S&P 500 Equal Weight Index is the equally weighted version of the S&P 500 Index. The S&P 500 Index is an unmanaged index considered representative of the US stock market.