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S&P Equal Weight vs. SPY
Old 08-14-2015, 05:13 PM   #1
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S&P Equal Weight vs. SPY

A financial adviser has been telling me about the equal weighting S&P ETFs being better than the S&P. I am not 10% sure which one specifically he is referring to, but RSP is one of them.

I like the S&P, and have many shares of IVV. I have never owned an equal weighted S&P ETF.

When I compare RSP to SPY, it seems a bit impressive and beats SPY.

Do you hold SPY/IVV or use any equal weighted version of the S&P?

Any thoughts, one vs. the other.
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Old 08-14-2015, 05:36 PM   #2
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It's overweight on Mid Cap in terms of market capitalization. Not really my cup of tea. If I wanted to change the tilt of my investments, I'd rather use the various Large Cap, Mid Cap and Small Cap funds and adjust to my desired allocation.

I'm the lazy sort so I just stick to the Total Stock Market Index.
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Old 08-14-2015, 08:23 PM   #3
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equal weighted S&P better then the S&P? Which S&P index are your referring too as the baseline? Do you know? I would assume your S&P is the S&P based on capitalization, correct? Have you looked at the S&P fundamental index?

I'm not sure the performance of these 3 verse each other ... or what others exist. While all are really valid indexes, one has to decide the indexes they want to track. Then the exact fund you use will cause another variation (not all actually buy the entire index)

I'm more intrigued with the fundamental index based on the method, but don't know the track record to commit significant funds to that investment.
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Old 08-14-2015, 08:54 PM   #4
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I'm not sure if these fit your definition, one sector fund that I've liked is Guggenheim growth index RPG, they also have a value fund RPV. But most of my money is in total US Vanguard's VTI.


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Old 08-14-2015, 09:03 PM   #5
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Originally Posted by bingybear View Post
equal weighted S&P better then the S&P? Which S&P index are your referring too as the baseline? Do you know? I would assume your S&P is the S&P based on capitalization, correct? Have you looked at the S&P fundamental index?
I have IVV, which id based on capitalization. The one the FA was referring to, had equal sector weighting.

I like IVV as it is no cost to get in or out at Fidelity. No worries, just set and forget. But the equal sector weighting is intriguing.

My rentals are my bond fund, so I just get the S&P.
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Old 08-14-2015, 09:42 PM   #6
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I have IVV, which id based on capitalization. The one the FA was referring to, had equal sector weighting.

I like IVV as it is no cost to get in or out at Fidelity. No worries, just set and forget. But the equal sector weighting is intriguing.

My rentals are my bond fund, so I just get the S&P.
Others have said that equal weighting will increase the mid-cap holdings (which it will). Over the last 10 years is has performed well... but as noted it is not a free lunch.

I always love the free trade defining what one will buy. Don't get me wrong, I look at it too, but only to a point. If you buy a chunk and pay your $8 fee .. and down the road sell the chunk for another $8 fee. It may not be significant.

I bought a bond fund with a fee associated the purchase, BCOIX, but I could have bought BCOSX without a transaction fee.... I bought the institutional fund instead of the retail fund. I save much more than the transaction fee in the expense and 12b1 fees not on the institutional class shares.

Fees matter, but avoiding a transaction fee for some other greater fee or not having the investment you want can be worse.

If you really want to try a more mid-cap weighted allocation, you can buy IVV and whatever fidelity sells as a NTF midcap ETF.

Fido changed their NTF ETF a while back. I preferred the prior versions (many of which I still own).

Instead of chasing some "hot ETF index", maybe look at the allocation your want (an S&P + a mid cap ETF to get similar weighting to RSP?) Either buy a couple NTF funds to mimic it, or spend the $8 to get RSOP. Having a little more midcap will likely inprove the return over the long run... but have higher volatility.
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Old 08-14-2015, 09:55 PM   #7
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Originally Posted by bingybear View Post
equal weighted S&P better then the S&P? Which S&P index are your referring too as the baseline? Do you know? I would assume your S&P is the S&P based on capitalization, correct? Have you looked at the S&P fundamental index?

I'm not sure the performance of these 3 verse each other ... or what others exist. While all are really valid indexes, one has to decide the indexes they want to track. Then the exact fund you use will cause another variation (not all actually buy the entire index)

I'm more intrigued with the fundamental index based on the method, but don't know the track record to commit significant funds to that investment.
S&P Equal Weight is basically the same stocks as the S&P 500 Index but instead of market capitalization determining the amount per stock, each stock gets an equal 0.2% weight so say you invest $1,000, you've got $2 in each stock. Since the S&P 500 consists of Large Cap and Mid Cap, going with equal weight gives you a greater Mid Cap tilt. Sure, it's higher potential return but it's also higher risk.

Instead of getting an fund or ETF based on S&P Equal Weight Index though, you could always just get something like VSMAX or VO (or whatever the Fidelity equivalent is) to increase your investment in Mid Cap.
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Old 08-15-2015, 05:30 AM   #8
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Originally Posted by hnzw_rui View Post
S&P Equal Weight is basically the same stocks as the S&P 500 Index but instead of market capitalization determining the amount per stock, each stock gets an equal 0.2% weight so say you invest $1,000, you've got $2 in each stock. Since the S&P 500 consists of Large Cap and Mid Cap, going with equal weight gives you a greater Mid Cap tilt. Sure, it's higher potential return but it's also higher risk.

Instead of getting an fund or ETF based on S&P Equal Weight Index though, you could always just get something like VSMAX or VO (or whatever the Fidelity equivalent is) to increase your investment in Mid Cap.
Great explanation! Thank you!
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Old 08-15-2015, 08:32 AM   #9
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+1 great explanation.

A couple years ago I played around with an idea of buying S&P sector funds weighted commensurate with the index and then rebalancing the sectors annually as a way of getting a little more juice out of domestic equities.

In my back testing, it slightly outperformed just holding the S&P... about 1% annually on average for the 8 years I backtested... some years better and some years worse. The idea was to try to get the alleged benefits of rebalancing within the S&P 500 sectors.

At the end of the day I never acted on it but still have the idea in the back of my mind to use on a part of my domestic equities portfolio.
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