These poor first quarter performances out of the large tech giants are weighting on market cap-weighted technology sector ETFs while the equal-weight tech ETF has held up. Over the past month, XLK dipped 0.9% and RYT rose 0.7%. In the past three months, RYT has increased 10.3% and XLK rose 7.8% [Read more: Alphabet, Microsoft Miss Reveals Pitfalls of Market-Cap ETFs].
XLK, a cap-weighted ETF, is top heavy, with a 14.0% position in AAPL, 9.8% Microsoft (NasdaqGS: MSFT), 6.0% Facebook (NasdaqGS: FB), 5.7% AT&T (NYSE: T), GOOG 5.1% and GOOGL 5.1%.
In contrast, RYT, an equally weighted ETF, more or less evenly spreads out its holdings, with the largest component Total System Services (NYSE: TSS) at 1.7% of its portfolio. Consequently, the fund takes a larger tilt toward smaller tech companies.
RYT’s market capitalization weights include mega-caps 14.5%, large-caps 39.8% and mid-caps 44.2%. In comparison, XLK has a hefty 68.0% tilt toward mega-caps, 23.0% large-caps and 8.9% mid-caps.
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Guggenheim S&P Equal Weight Technology ETF