The final quarter of the 2023 calendar year is rapidly approaching, and with it comes an opportunity for investors to revisit their portfolios. The year has offered a series of challenges and sources of uncertainty, with concentration risk and inflation key. The former challenge there may prove especially urgent for investors to consider with the S&P 500 so top-heavy. Those and other factors may invite investors to take a closer look at a strategy like the equal weight ETF EQL.
Why worry about concentration risk? Just a few stocks have helped drive the vast majority of the S&P 500’s growth this year. Entering a new year means that markets may see a shift in the factors that propped those names up. With most of them in tech, for example, bad news in the tech industry for big names like Apple (AAPL) would threaten many portfolios. By investing in an equal-weight ETF, investors can instead get some helpful diversification.
EQL, the Alps Equal Sector Weight ETF, does more than just equal weight its stocks, however. It also equal weights whole sectors, providing a straightforward tool for investors who don’t want to lean into one sector too much. Investing in SPDR funds, it equal weights sectors ranging from real estate to utilities, from energy to healthcare.
Equal Weight ETF EQL’s Performance
The strategy doesn’t just offer a strong investment case as a diversification tool, either. It has also performed well on its own terms. The equal-weight ETF has returned 14.6% over the last year, outperforming both its ETF Database Category and Factset Segment averages. EQL has also returned 6.5% YTD, which beats its averages on a YTD basis, too, and has returned 5.3% over the last six months.
EQL tracks the NYSE Select Sector Equal Weight Index for a 26 basis point fee. For investors worried about concentration risk rising in a new year, it may be worth eyeing EQL now.
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