The Long-Term Case for Equal Weight ETF EQL | ETF Trends

Tired of the month-to-month back and forth in stock market narratives? The last few years’ worth of Fed watching has taken up quite a bit of oxygen, distracting from longer-term portfolio construction questions. That may inspire investors to take a closer look at strategies that have shown their worth over longer time frames. One strategy, the ALPS Equal Sector Weight ETF (EQL), not only has a strong record but also an intriguing case moving forward.

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EQL has quite a long track record to consider. The equal weight ETF has returned nearly 11% over the last 10-year period, doing even better over the last five. Indeed, in the last five years, including quite a bit of tumult, it has returned 12.8%. That data, from SS&C ALPS Advisors, also shows that the ETF has returned a very solid 20.8% over the last one year.

That comes pretty close to the S&P 500 Index’s returns, while also offering a significant set of defensive advantages. EQL’s approach, by weighting sectors equally, can limit downside if bigger sectors that markets rely on right now like tech disappoint. By contrast, it could perform well if a sector EQL invests in that others don’t expect much from does well. While its equal-weighting scheme may limit some upside, those other factors may appeal.

It may stand out especially as 2024’s uncertainty grows. Rates may not come down nearly as quickly as they rose up to this point. What’s more, if AI turns out to be a bubble, mitigating tech downside could help.

EQL charges a 25 basis point fee for its services. Tracking the NYSE Select Sector Equal Weight Index, its returns have outperformed averages like the ETF Database Category average. The fund’s specific approach could play a role for investors in the medium and long terms.

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