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How A More Balanced S&P 500 Can Lead To Richer Returns
When I load equities thru spiffs (special investment positions) I usually use an equal weighted S&P 500 Index fund over the cap weighted one. I like the quarterly rebalance feature the fund that I use most often utilizes. In addition, the equal weight fund is about 52% large caps, 46% mid caps and 2% small caps. Years back when I could buy the S&P1500 Index etf ... I use it.
I have two of Guggenheim's equal weight etfs, RHS (consumer staples) and RYU (utilities). I also have the market weight etfs of these same sectors (XLP and VPU). In the case of staples, equal weight beats market weight 1, 3 and 5 years, utilities about half the time. They do not have more than a 5 year history, however being fairly new products. I am considering adding RSP to my investments, to augment, not replace VOO. I still have more in managed funds than etfs and indexes, but the gap is starting to close a bit except for international, small cap and bond funds where I prefer managed funds.
My theory is that equal weight is OK for satellite positions but should not be used for the core of your stock portfolio. The core IMO should be certain to track the stock market. VTI serves that purpose, and it's a 100% guarantee. Any shift to beat the market introduces potentially unintended risk. Granted, the risk is pretty small but the excess return of RSP over VTI is also pretty small.
Comments
The suggestions were not just to go SP500 alone, that's all.