FMD Capital Management

Posts Tagged: equal weight

Measuring the Efficiency of Revenue Weighted ETFs

Written by David Fabian, May 16th, 2017

It’s become difficult to distinguish the efficacy of various index weighting strategies that pervade the ETF universe.  Some work best during specific market cycles or are designed to take advantage of distinguishable trends.  Others are tailor-made for the long-term with the broad diversification, reasonable costs, and sensible philosophy that investors can identify with.

It’s these latter characteristics that best describe the revenue-weighted index methodology that is delivered by a select group of Oppenheimer funds.  The Oppenheimer Large Cap Revenue ETF (RWL) is a fund that was born during the nascent months of the great financial crisis and has risen from those dark times with an impressive track record.

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Biotech ETF On The Brink Of A Breakout

Written by David Fabian, February 16th, 2017

The volatility in the biotech space over the last two years has been quite a sight to behold.  I’m not strictly speaking of volatility in terms of downside either.  There has been money to be made on both sides of the market for those that have been nimble in their trades.

Most ETF investors are probably familiar with trading the iShares NASDAQ Biotechnology ETF (IBB).  This market-cap weighted giant has $8.2 billion dedicated to a basket of 164 stocks in the biotech research and medical services fields.  As you can see on the chart below, this index has been on a rollercoaster ride of whipsaws in both directions over the last year.

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These Beloved Equal Weight ETFs Are Hidden In Plain Sight

Written by David Fabian, August 30th, 2016

The first indexes to ever grace the field of exchange-traded funds were all market-cap weighted baskets.  This structure gives the largest share of assets to the stocks with the biggest outstanding share floats.  In many ways this makes sense, because it provides investors with the same distribution of wealth that market prices have already factored in.  This is the reason why Apple Inc (APPL) is the largest holding in the market-cap weighted SPDR S&P 500 ETF (SPY) at 3.09%.

In the pervasive quest to outperform these well-known benchmarks, the concept of equal weight indexes was introduced.  An equal weighted methodology takes a certain number of stocks and gives them a similar distribution of invested capital.

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Evaluating Opportunities In Equal Weight ETFs

Written by David Fabian, July 14th, 2015

Equal weight exchange-traded funds are one of the oldest and most easily understood of all the smart beta strategies. Simply put, these indexes allocate an equal portion of the underlying assets to each of the designated holdings.   While that may not seem like an important distinction, it can have a tremendous impact on the overall portfolio construction, performance, fees, and risk of a particular group of stocks.

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Equal Weight ETFs Can Juice Your Returns

Written by David Fabian, July 31st, 2013

When constructing a growth or income portfolio I always start with core positions that are the foundation for a diversified and balanced strategy. Core positions typically track established indices such as the S&P 500 or Dow Jones Industrial Average because they give you diversified correlation to the broader market. Then you can layer in some sector, industry or special situation funds to enhance the characteristics of your portfolio given the amount of risk you are willing to take.

Another way to juice the returns of your portfolio is to look for core positions that are outperforming their peers. This is exactly what equal weight ETFs have been doing for some time now. Read more