Equal-Weight ETF Consistently Outperforming S&P 500

ETF Trends

Investors keep a close eye on the S&P 500 and the blue-chip benchmark has climbed to new all-time highs. However, an ETF tracking an equal-weighted version of the S&P 500 has consistently beaten the index, due in part to the outperformance of U.S. mid-cap stocks.

Over the past 10 years, the Guggenheim S&P 500 Equal Weight ETF (RSP) has out returned on average 10.7%, compared to the 8.0% return of the the SDPR S&P 500 ETF (SPY) . [ETF Chart of the Day: S&P 500]

RSP has gained 17.2% year-to-date, 26.6% the past year, 17.1% the last three years (annualized) and 8.1% the past five years. In comparison, SPY has increased 15.2% year-to-date, 22.3% the past year, 16.0% the last three years and 5.5% the past five years.

“Despite owning mostly large-cap stocks, by equal-weighting them, the portfolio behaves more like a mid-cap fund, with a greater beta and volatility than a large-cap fund,” Morningstar analyst Michael Rawson said in a note on RSP. “Thus, this fund should really be compared with a mid-cap fund and that exposure can be obtained more cheaply. In addition, there may be a slight improvement in return resulting from the strategy’s need to frequently rebalance by selling recent winners and buying recent losers, which results in a forced buy low/sell high approach.”

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