Equal-Weight Index
A stock market index that assigns the same percentage weight to every constituent regardless of market capitalization.
What is Equal-Weight Index?
An equal-weight index allocates an identical percentage to each component stock, unlike a market-capitalization-weighted index where larger companies dominate. In a 500-stock equal-weight index, each stock starts at 0.2% of the portfolio. Because prices diverge over time, equal-weight indexes require periodic rebalancing — typically quarterly — to restore equal allocations, which systematically trims winners and adds to laggards. This rebalancing creates a small-cap tilt and a value tilt relative to cap-weighted peers. Equal-weight indexes have historically outperformed cap-weighted alternatives over long periods, though with higher turnover, transaction costs, and volatility.
Example
The Invesco S&P 500 Equal Weight ETF (RSP) tracks an equal-weight version of the S&P 500. Because large-cap technology stocks dominate the standard S&P 500 by market cap, RSP's top holdings are spread across all 500 members equally. From 2003 through 2023, RSP outperformed the cap-weighted SPY in total return in most calendar years, though it lagged during periods such as 2023 when mega-cap tech stocks surged and dominated cap-weighted returns.
Source: Invesco — RSP ETF