In this episode of “What’s the Risk?” we take a look at the historic performance of the S&P 500 Equal Weight NR Index AUD, which some investors may know is tracked by Betashares QUS ETF.
Equal weight indices have become more topical as market cap weighted indices have shown increased concentration in a smaller number of companies at the top of the index. For some investors their instinct tells them that this needs to be avoided and they’d be much better in an equal weighted index fund. This belief can be backed up by long term data showing that equal weight indices outperforming their cap weighted counterparts.
While over the long term equal weight indices have shown outperformance, every strategy has to be replicated in the wild successfully after costs and taxes. This is where equal weight strategies can run into problems.
