The technology and real estate sectors are leading the rally on Wednesday.
Technology and real estate each rose 1.7% in midday trading, as the S&P 500 is on track to climb over 1% during the day. Investors looking to overweight the tech and real estate sectors may want to consider an equal-weight approach to get more balanced exposure. 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 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 as of March 28, RYT has climbed 8.3%, while the cap-weight technology sector has climbed 16.3%. RYT is modestly outpacing the cap-weight index over a one-year period, as the cap-weight sector experienced a more dramatic decline in 2022.
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 -5.6% year-to-date, compared to the cap-weight real estate sector’s decline of -3.8% during the same period. EWRE is outpacing the benchmark by over 10% over a three-year period.
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