Equal Weighting: Balance, Growth, and Long-Term Gains
A Smarter Path to Growth
Cap-weighted indices have long been the standard in the investment world, but the cracks in their dominance are starting to show. Traditional indices like the S&P 500 or Russell 2000 favor the giants—massive companies that drive the index, leaving investors vulnerable to concentration risk. In a bull market, it seems like a winning formula, with heavyweights like Apple or Amazon leading the charge. But what happens when the market turns? A downturn in just a handful of companies can drag the entire index down, taking your portfolio with it.
“Equal-weight portfolios have tended to outperform market-cap-weighted portfolios over time.”
That’s where equal-weight strategies come into play—a true game-changer for those seeking a more balanced approach. At iQUANT, we’re committed to spreading the risk, ensuring every stock in your portfolio has a say, regardless of its size. This shift empowers smaller companies, which are often underrepresented in cap-weighted strategies, to contribute to long-term performance gains. It’s not just about diversification—it’s about rethinking how we approach returns.
equal weight = bigger gains
Over the last two decades, the S&P 500 Equal Weight Index posted a compound annual growth rate of 9.9%, compared to 8.6% from the traditional cap-weighted S&P 500. On a $100,000 investment, that difference adds up to an additional $147,000. And when you look at small-cap and mid-cap indices, equal-weight strategies have outperformed their cap-weighted counterparts by even larger margins.
The takeaway? Equal-weight strategies don’t just level the playing field—they offer a smarter, more resilient approach to navigating the markets. As cap-weighted indices become increasingly dominated by the top few stocks, equal-weight gives you a balanced, long-term path toward superior growth.
At iQUANT, we’re at the forefront, helping advisors build portfolios that are not only diversified but designed to excel.