The recent bout of lackluster earnings results from big names has dragged on traditional market capitalization-weighted strategies that tilt toward the largest companies. Exchange traded fund investors, though, can diminish this concentration risk through equal-weighted ETFs.

An equal-weighted indexing methodology can make sense in a portfolio, especially in sectors as volatile as technology.

This is especially true after the recent unexpected earnings from technology stalwarts like Apple (NasdaqGS: AAPL) and Intel (NasdaqGS: INTC), coupled with the re-composition from the GICS sector changes that carved out the new communication services sector, which has heightened volatility in the technology sector.

The Invesco S&P 500 Equal Weight Technology ETF (RYT) has been consistently outperforming the S&P 500. RYT gained 17.0% year-to-date and returned an average annualized 25.8% over the past three years, 17.1% in the past 5 years and 21.5% for the past 10 years, according to Morningstar data. In comparison, the S&P 500 is up 11.2% year-to-date and returned an average 15.5% for the past three years, 11.0% for the past five years and 16.0% for the past 10 years.

Potential investors should be aware that due to the equal-weight indexing methodology, the portfolio has a greater tilt toward mid-sized companies. Specifically, RYT includes a 37.9% weight toward mid-caps, along with 40.7% large-caps and 21.4% mega-caps.

For more information on ETFs, visit our ETF 101 category.

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