The technology and real estate sectors are rallying on Thursday, each posting 1% gains in midday trading.
Investors looking to overweight the tech and real estate sectors may want to consider an equal weight approach to take a more balanced approach to the sectors. Equal weight funds offer diversification benefits, effectively limiting the impact that the largest holdings can have on the overall funds.
The equal weight methodology of selling relative winners and buying relative losers at each rebalance introduces a slight value tilt to portfolios, something that has continuously paid off in the current market environment.
The Invesco S&P 500 Equal Weight Technology ETF (RYT) offers exposure to the technology sector but its underlying index utilizes an equal-weight methodology, meaning that component companies receive equal allocations at each quarterly rebalance. This results in exposure that is considerably more balanced than other alternatives. An equal-weight approach is particularly impactful in the top-heavy tech sector, which is dominated by just a handful of names.
Year to date, RYT has declined -18.37% as of the end of November, compared to the cap-weighted tech sector’s decline of -21.14% during the same period.
The S&P 500 Equal Weight Information Technology Index covers the following industries: internet equipment, computers and peripherals, electronic equipment, office electronics and instruments, semiconductor equipment and products, diversified telecommunication services, and wireless telecommunication services.
The Invesco S&P 500 Equal Weight Real Estate ETF (EWRE) offers equal weight exposure to the real estate sector, giving each security an equal weight at each quarterly rebalance.
EWRE has declined -20.19% year to date through November, compared to the cap-weight real estate sector’s decline of -22.38% during the same period.
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