Tony's ETF Buyers Guide: Equal-Weight ETFs

Broad-market equal-weight ETFs

My guide starts with broad-market equal-weight ETFs, and my criteria here are straightforward: the ETF must cover a majority of the 11 GICS sectors within a specific geography.

The most prominent player in this space is the Invesco S&P 500 Equal Weight ETF

. It's the largest, boasting over $53 billion in assets under management (AUM).

With a 0.2% expense ratio, RSP gives you equal exposure to each of the 500 stocks in the S&P 500 at each quarterly rebalance. Not to mention, it's also one of the longest-standing options, established in 2003. It also has an ESG-friendly version, the Invesco ESG S&P 500 Equal Weight ETF

.

For those looking to equal weight other major indices, there are alternatives, although not from Invesco. The First Trust offers the NASDAQ-100 Equal Weighted Index Fund ETF

and the First Trust Dow 30 Equal Weight ETF

EDOW

-0.23%

, with expense ratios of 0.58% and 0.5%, respectively.

And what about the lesser-known options? Invesco hasn't stopped at RSP. It also offers the Invesco Russell 1000 Equal Weight ETF

— a prime choice for those seeking maximal diversification within the equal weight philosophy — and the relatively obscure Invesco S&P 100 Equal Weight ETF

EQWL

+0.3%

.

The sector-specific equal weight ETFs

What if you're aiming for a more targeted approach within a specific sector, such as energy, but you prefer not to have a portfolio overly concentrated in the sector's behemoths like Exxon Mobil and Chevron?

Equal-weighted sector ETFs offer a solution. Again, Invesco leads the charge with a full suite of ETFs corresponding to the 11 GICS sectors, each with an expense ratio of 0.4%:

1. Invesco S&P 500 Equal Weight Health Care ETF
   RSPH
   -0.06%
2. Invesco S&P 500 Equal Weight Consumer Discretionary ETF
   RSPD
   -0.04%
3. Invesco S&P 500 Equal Weight Technology ETF
   RSPT
   +1.82%
4. Invesco S&P 500 Equal Weight Financials ETF
   RSPF
   -0.73%
5. Invesco S&P 500 Equal Weight Utilities ETF
   RSPU
   -1.86%
6. Invesco S&P 500 Equal Weight Industrials ETF
   RSPN
   -0.18%
7. Invesco S&P 500 Equal Weight Materials ETF
   RSPM
   -1.45%
8. Invesco S&P 500 Equal Weight Energy ETF
   RSPG
   +1.16%
9. Invesco S&P 500 Equal Weight Consumer Staples ETF
   RSPS
   -0.3%
10. Invesco S&P 500 Equal Weight Real Estate ETF
    RSPR
    -1.33%
11. Invesco S&P 500 Equal Weight Communication Services ETF
    RSPC
    -0.2%

Because these funds are based on the S&P 500 sectors but apply an equal-weighted strategy, they tend to have a higher allocation to mid-cap stocks.

This characteristic can be particularly advantageous in sectors like energy, where in most market cap weighted indexes, just two stocks, Exxon and Chevron, can dominate nearly 40% of the sector's weighting.

Odds and ends

Finally, the ALPS Equal Sector Weight ETF

offers a unique twist compared to the typical equal-weighting strategy used by the aforementioned ETFs.

Instead of balancing the weights of individual stocks, EQL distributes equal weights across entire sectors. It achieves this by investing in all 11 of the Select Sector SPDRs, each of which adheres to a market-cap-weighted strategy within its respective sector.

Essentially, EQL ensures that each sector—from technology to utilities—maintains an equal share of the ETF's total portfolio. This approach cleverly addresses concentration risk at the sector level, rather than the stock level, although within each sector, the larger companies still hold sway due to traditional market-cap weighting.

This structure strikes a balance between the broad diversification benefits of equal weighting across sectors and the performance potential that larger companies within those sectors can offer.

While EQL might not be a pure equal-weighted fund in the conventional sense, it presents an innovative alternative. If you're looking to mitigate sector concentration risks while still capitalizing on the performance of major players within those sectors, EQL could be an unconventional choice.

Please note this article is for information purposes only and does not in any way constitute investment advice. It is essential that you seek advice from a registered financial professional prior to making any investment decision.