This is one of a series of articles discussing smart beta ETFs. Other smart beta articles you can read:
An equal weight ETF is merely an ETF that follows an index that doesn't weight the stocks it is holding by market capitalization, but instead gives an equal weight to every stock. It seems like a subtle difference, but the effects can be profound. An equal weight index causes the largest companies to be under-weighted compared to the market, and the smallest companies to be over-weighted compared to the market. This tilt towards smaller companies can be important, as factor research almost always concludes that smaller companies outperform large companies over the long-term.
An equal weight index often also causes a value tilt, because a traditional market capitalization weighted index is required to continue to buy the most highly priced (valued) stocks. By visiting the ETF's website, you can usually find information on the ETF's holding, such as the average price to book value, or average market capitalization. By comparing this information to information obtained from SPY's website (or the appropriate benchmark), you can usually determine if there is in fact a value tilt.
There are a large number of equal weight ETPs, as shown in this table:
| Category | Count |
|---|---|
| Alternatives | 1 |
| Commodities | 2 |
| Global Equity | 37 |
| Special Security Types | 2 |
| US Equity | 123 |
| US Fixed Income | 2 |
| Total | 167 |
| Year of Inception | Count |
|---|---|
| 2000 | 1 |
| 2003 | 3 |
| 2005 | 3 |
| 2006 | 25 |
| 2007 | 2 |
| 2008 | 2 |
| 2010 | 5 |
| 2011 | 7 |
| 2012 | 6 |
| 2013 | 7 |
| 2014 | 12 |
| 2015 | 21 |
| 2016 | 9 |
| 2017 | 18 |
| 2018 | 15 |
| 2019 | 15 |
| 2020 | 6 |
| 2021 | 9 |
| 2022 | 1 |
| Total | 167 |
Note that there were actually even more ETFs launched then this table shows, as we are only displaying the launch dates of ETFs still active in our database. There were more ETFs that were launched during these years that have since been closed down by their sponsor.
More and more ETFs are being launched that combine equal weight investing with other investment factors:
| Number of Factors Used | Count |
|---|---|
| 0 | 87 |
| 1 | 40 |
| 2 | 17 |
| 3 | 11 |
| 4 | 10 |
| 5 | 2 |
| Total | 167 |
Here are the equal weight ETFs that only use equal weighting as a strategy (i.e. they are not multi-factor ETFs):
| Symbol | Description | Inception Date | Category |
|---|---|---|---|
| XNTK | SPDR NYSE Technology ETF | 09/25/2000 | US Equity |
| RSP | Invesco S&P 500 Equal Weight ETF | 04/24/2003 | US Equity |
| KBE | SPDR S&P Bank ETF | 11/08/2005 | US Equity |
| KCE | SPDR S&P Capital Markets ETF | 11/08/2005 | US Equity |
| KIE | SPDR S&P Insurance ETF | 11/08/2005 | US Equity |
| XBI | SPDR S&P Biotech ETF | 01/31/2006 | US Equity |
| XHB | SPDR S&P Homebuilders ETF | 01/31/2006 | US Equity |
| XSD | SPDR S&P Semiconductor ETF | 01/31/2006 | US Equity |
| QQEW | First Trust NASDAQ-100 Equal Weighted Index Fund ETF | 04/19/2006 | US Equity |
| QTEC | First Trust NASDAQ-100-Technology Sector ETF | 04/19/2006 | US Equity |
| FBT | First Trust NYSE Arca Biotechnology ETF | 06/19/2006 | US Equity |
| KRE | SPDR S&P Regional Banking ETF | 06/19/2006 | US Equity |
| XES | SPDR S&P Oil & Gas Equipment & Services ETF | 06/19/2006 | US Equity |
| XME | SPDR S&P Metals and Mining ETF | 06/19/2006 | US Equity |
| XOP | S&P Oil and Gas Exploration ETF | 06/19/2006 | US Equity |
| XPH | SPDR S&P Pharmaceuticals ETF | 06/19/2006 | US Equity |
| XRT | SPDR S&P Retail ETF | 06/19/2006 | US Equity |
| RGI | Invesco S&P 500 Equal Weight Industrials ETF | 11/01/2006 | US Equity |
| RHS | Invesco S&P 500 Equal Weight Consumer Staples ETF | 11/01/2006 | US Equity |
| RCD | Invesco S&P 500 Equal Weight Consumer Discretionary ETF | 11/01/2006 | US Equity |
| RTM | Invesco S&P 500 Equal Weight Materials ETF | 11/01/2006 | US Equity |
| RYE | Invesco S&P 500 Equal Weight Energy ETF | 11/01/2006 | US Equity |
| RYF | Invesco S&P 500 Equal Weight Financials ETF | 11/01/2006 | US Equity |
| RYH | Invesco S&P 500 Equal Weight Health Care ETF | 11/01/2006 | US Equity |
| RYT | Invesco S&P 500 Equal Weight Technology ETF | 11/01/2006 | US Equity |
| RYU | Invesco S&P 500 Equal Weight Utilities ETF | 11/01/2006 | US Equity |
| EQWL | Invesco Russell Top 200 Equal Weight Portfolio ETF | 12/01/2006 | US Equity |
| QQXT | NASDAQ 100 Ex-Technology ETF | 02/08/2007 | US Equity |
| PLW | Invesco 1-30 Treasury Ladder Portfolio ETF | 10/11/2007 | US Fixed Income |
| GCC | GreenHaven Continuous Commodity Index Fund ETF | 01/24/2008 | Commodities |
| EUSA | iShares MSCI USA Equal Weighted ETF | 05/05/2010 | US Equity |
| RETL | Direxion Retail Sector (3x) ETF | 07/14/2010 | US Equity |
| USCI | United States Commodity Index ETF | 08/10/2010 | Commodities |
| EWMC | Invesco S&P MidCap 400 Equal Weight ETF | 12/03/2010 | US Equity |
| EWSC | Invesco S&P SmallCap 600 Equal Weight ETF | 12/03/2010 | US Equity |
| XHE | SPDR S&P Healthcare Equipment ETF | 01/26/2011 | US Equity |
| XTL | SPDR S&P Telecom ETF | 01/26/2011 | US Equity |
| XTN | SPDR S&P Transportation ETF | 01/26/2011 | US Equity |
| XAR | SPDR S&P Aerospace & Defense ETF | 09/28/2011 | US Equity |
| XHS | SPDR S&P Health Care Services ETF | 09/28/2011 | US Equity |
| XSW | SPDR S&P Software & Services ETF | 09/28/2011 | US Equity |
| NFTY | First Trust India NIFTY 50 Equal Weight ETF | 02/14/2012 | Global Equity |
| QQQE | Direxion NASDAQ-100 Equal Weighted Index Shares ETF | 03/21/2012 | US Equity |
| BBC | BioShares Biotechnology Clinical Trials ETF | 12/16/2014 | US Equity |
| BBP | BioShares Biotechnology Products ETF | 12/16/2014 | US Equity |
| EQAL | Invesco Russell 1000 Equal Weight ETF | 12/22/2014 | US Equity |
| XT | iShares Exponential Technologies ETF | 03/19/2015 | Global Equity |
| DRIP | Direxion Daily S&P Oil & Gas Exploration & Production Bear 3X ETF | 05/28/2015 | US Equity |
| GUSH | Direxion Daily S&P Oil & Gas Exploration & Production Bull 3X ETF | 05/28/2015 | US Equity |
| LABD | Direxion Daily S&P Biotech Bear 3X ETF | 05/28/2015 | US Equity |
| LABU | Direxion Daily S&P Biotech Bull 3X ETF | 05/28/2015 | US Equity |
| EWRE | Invesco S&P 500 Equal Weight Real Estate ETF | 08/13/2015 | US Equity |
| DPST | Direxion Daily Regional Banks Bull 3x Shares ETF | 08/19/2015 | US Equity |
| CNCR | Loncar Cancer Immunotherapy ETF | 10/13/2015 | US Equity |
| XITK | SPDR FactSet Innovative Technology ETF | 01/13/2016 | US Equity |
| EPRF | S&P High Quality Preferred ETF | 05/23/2016 | Special Security Types |
| XWEB | SPDR S&P Internet ETF | 06/27/2016 | US Equity |
| IBD | Inspire Corporate Bond Impact ETF | 07/10/2017 | US Fixed Income |
| EDOW | First Trust Dow 30 Equal Weight ETF | 08/08/2017 | US Equity |
| MAGA | Point Bridge GOP Stock Tracker ETF | 09/06/2017 | US Equity |
| GSEW | Goldman Sachs Equal Weight U.S. Large Cap Equity ETF | 09/12/2017 | US Equity |
| EMTY | ProShares Decline of the Retail Store ETF | 11/16/2017 | US Equity |
| DTEC | ALPS Disruptive Technologies ETF | 12/29/2017 | Global Equity |
| FNGD | BMO REX MicroSectors FANG+ Index 3X Inverse Leveraged ETN | 01/23/2018 | Global Equity |
| FNGU | BMO REX MicroSectors FANG+ Index 3X Leveraged ETN | 01/23/2018 | Global Equity |
| IRBO | iShares Robotics and Artificial Intelligence ETF | 06/26/2018 | Global Equity |
| FNGO | MicroSectors FANG+ Index 2X Leveraged ETN | 08/02/2018 | Global Equity |
| QTUM | Defiance Quantum ETF | 09/04/2018 | US Equity |
| EWCO | Invesco S&P 500 Equal Weight Communication Services ETF | 11/07/2018 | US Equity |
| EWJE | iShares MSCI Japan Equal Weighted ETF | 03/07/2019 | Global Equity |
| BNKU | MicroSectors U.S. Big Banks Index 3X Leveraged ETN | 04/03/2019 | US Equity |
| NRGU | MicroSectors U.S. Big Oil Index 3X Leveraged ETN | 04/23/2019 | US Equity |
| PLAT | WisdomTree Modern Tech Platforms ETF | 05/22/2019 | Global Equity |
| NERD | Roundhill BITKRAFT Esports & Digital Entertainment ETF | 06/04/2019 | Global Equity |
| CNRG | SPDR S&P Kensho Clean Power ETF | 06/25/2019 | Global Equity |
| HAIL | SPDR S&P Kensho Smart Mobility ETF | 06/25/2019 | Global Equity |
| WCLD | WisdomTree Cloud Computing ETF | 09/06/2019 | US Equity |
| TMDV | ProShares Russell US Dividend Growers ETF | 11/27/2019 | US Equity |
| MOON | Direxion Moonshot Innovators ETF | 11/12/2020 | US Equity |
| JGLD | Amplify Pure Junior Gold Miners ETF | 12/01/2020 | Global Equity |
| BNKD | MicroSectors U.S. Big Banks Index -3X Inverse Leveraged ETN | 03/29/2021 | US Equity |
| NRGD | MicroSectors U.S. Big Oil Index -3X Inverse Leveraged ETN | 03/29/2021 | US Equity |
| SOGU | The Short De-SPAC ETF | 05/19/2021 | US Equity |
| DOZR | Direxion Daily US Infrastructure Bull 2X Shares ETF | 09/23/2021 | US Equity |
| FNGG | Direxion Daily Select Large Caps & FANGs Bull 2X Shares ETF | 09/30/2021 | Global Equity |
| MNM | Direxion Daily Metal Miners Bull 2X Shares ETF | 12/16/2021 | US Equity |
| EVEN | Direxion Daily S&P 500 Equal Weight Bull 2X Shares ETF | 01/20/2022 | US Equity |
RSP, which equal weights the S&P 500, started in 2003 and has a clear track record of outperforming the S&P 500:
The track record for other equal weighted ETFs is not so amazing. For example, QQEW equal weights the Nasdaq 100:
EQWS equal weights the Russell 2000:
The fact that equal weighting the S&P 500 has worked, but equal weighting the Russell 2000 has not, is probably a sign that RSP's outpeformance compared to SPY has been due to its tilt toward smaller companies. The Russell 2000 already consists of small cap stocks, so tilting it even further towards smaller companies presumably doesn't have much of an effect.
Because of its proven track record, any investor willing to include smart beta ETFs in their long-term portfolio should probably include RSP in it.
One thing of note. If you look again at a price chart showing the ratio of RSP to SPY, you can see that RSP performed worse than SPY during the last market crash, although it quickly recovered. It is not clear why that happened.
All data is a live query from our database. The wording was last updated: 10/30/2018.
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