I’ll stick with OG because the beauty of cap weighted is that cream floats and turds sink . Equal weight makes the system fail. Excellent analysis as usual.
I had the same thought. "So, if Apple rises the fund will sell it and buy more Nikola even as it plunges towards oblivion? Is that correct? Run that by me again ... on second thoughts, dont bother."
@@nighttrain1236 Too late. They bought it as it fell bought more the more it fell then sold just before oblivion or maybe after the hIndenberg report. I dont regard that as a winning strategy LOL
@@Joe-lb8qn The flip-side is you aren't buying into overvalued stocks and selling when they crash. The mega-caps come and go over the long run in the S&P 500. Concentration doesn't last. A similar performance to the cap-weighted S&P 500 since 1994 is quite interesting. This smoothes out the S&P performance over the long run (vs cap-weighted) albiet at a slight cost penalty.
Great analyses as usual, many thanks. It seems to me equal weighted 500 is essentially a diversification play essentially. I loved it you said in the film only 3 ofvthe mag 7 survived (this comes to me every time i hear the phrase!)
Great analysis, so many alternatives, hedging, diversification, under value play, small caps, emerging, etc etc. While I'm in a fund thats multi asset for diverse growth, i'm taking my 2.4ish dividend early January then running to the hills. All in on normal SP500 ETF for next 10 years of growth phase, going to stop watching you tube and ignore the headlines and head down by continuing to load up monthly, then I'll return to see how everyone has compared in performance terms ;]
Nasdaq will open -300 points. Look at NIKKEI futures down 5% now. Last day of quarter is Monday, they will unload their winners. 3pm switch horses to IWM on the low of the day. Mark my words. The SPY chart is clear, leg down Monday.
When it comes to trading strategies, they can be pretty intense for the everyday investor. In reality, these tactics are often executed by the pros who have the expertise and experience to make those trades work. It's all about leveling up your skills and knowledge to play in the big leagues of trading.
Same thoughts, great points. I recently analysed at the general equal weights vs market cap argument and what I found is equal weights don’t really outperform, which was surprising. S&P 500 is an exception to this but even then it depends on the comparison time period. I show how this applies to the broader indices including MSCI world, have a look if you’re interested.
Hi @IncomeBoost42 thanks for sharing that. It's essentially a small cap tilt which will usually outperform in risk rallies and coming out of a selloff period as markets recover. Thanks, Ramin.
I feel i missed the boat with Nivada and maybe Taiwan semiconductors, what do you think about the iShares iShares MSCI Global Semiconductors UCITS ETF Acc GBP for a 5 year hold? Is it likely to out do the S&P500?
I'd like to see a fund weighted linearly by a simple rank of market cap. Seems like it would be a nice middle ground between equal weight and that sheer exponential curve.
In today's S&P500, there is not only a concentration of market cap in the mag7, but there is a concentration in geography (domestic), a concentration in sector (Technology), and concentration in corporate strategy (AI). When the AI bubble bursts, the mag7 will all fall together.
That's what I'd expect, because EW S&P 500 for practical purposes turns into a midcap fund. While dominated by the few megacaps, 62% of SP500 companies are mid cap by Morningstar's categorization. This is why I conceptually dislike the EW SP500 -- IMO if I want the midcap tilt, the elegant way, with less buying and selling, is to buy SP100 and SP400 index funds and overweight the SP400 allocation.
For simplicity's sake, are there no ETFs or funds which just track the bottom 50% or 75% (or other proportion) of the S & P 500? That would hardly be a small-cap tracker - the lowest market cap in the 500 is $15B. Any suggestions?
Just look for a midcap fund like the s&p400. They react very similarly to an equal weight fund or to stocks in the bottom half of the s&p500 but have much less turnover and the losses associated.
Amundi have just launched 2 etf based on msci usa, one with all the stocks with a market cap superior to 200 billions and the other with all the stocks under 200 billions. They are domicilied in ireland
All very interesting and useful but I have one big anxiety about my investments and that is the US National Debt of $34 trillion rising every second by 100s of thousand and I'd love to have a video on that topic. There's so many frightening predictions out there coupled with the soaring price of gold. A weighty video from you might help calm my and other's fears.
The big challenge at the moment for US denominated EFS at the moment is the very strong momentum of the £ vs the $. Despite the S&P hitting all time highest UK based ETFs like VUAG are lower per share due to the strong £. It looks like the £ is going to continue strengthening for a while at least.
It's only strengthening due to the given belief that the BOE are a little more reluctant to currently cut rates at a fast pace going forward compared to the US. That can literally change in an instant. Some data, higher unemployment, inflation coming in much lower than expected number and the situation could change rapidly.
Hi @jayaramr that's a good idea and pretty close to what I do personally. This was more about equal weight rather than alternatives, but maybe I should have mentioned that possibility... Thanks, Ramin.
The great Jack Bogle once said that using any weightage other than market cap can be quite cumbersome and more expensive, and may not achieve what we are after - that is, better returns. But I do agree that analysing the pros/cons of the EW approach can be informative.
This is my “personal” take. 1) I invest in a market weighted fund because my entire portfolio is tied up in my sipp in vanguard. They don’t offer equal weighted. 2) personally I won’t mind having an equal weighted index fund but it’s way too much effort at this point. 3) like ramy mentioned, they’re magnificent for a reason, relying on market weighted index fund is like saying to the world, here’s my money, may the best companies receive it.
Hi Ramin. According to Investor's Chronicle, the Invesco S&P 500 Equal Weight ETF (SPEQ) only fell 0.7% in 2022, vs 8.1% for market cap ETFs. In 2024 SPEQ has grown 17.3% compared to 26%. This suggests lower volatility, at least recently. What do you think?
The world changes, but one thing is for sure, the world is becoming even more reliant on tech, and this is not going to change, certainly not in the next 20 years, it's only going to increase.
Probably, because you'd have a bigger percentage of the top few mega tech companies. The big question is whether that strategy will work for the next 5 years.
Quiz question: when is an index fund not an index fund? I see indexes are been created at a rate that puts even the growth of US equity to shame. Is an active fund that "uses a tried a tested method of stock picking" also an index fund? US equity ex mega 8 is still not cheap?
It is surprising to me that there is not more difference in performance over sensible periods of time eg the last 30 years. It occurs to me to wonder: how would a contrarian (so to speak) "anti market cap index" have fared, where the proportion of stocks invested any one company was *inversely* proportional to its market cap share? Hugely more volatile, I suppose, but what would the long-term overall performance look like?
What about the merits of a Sterling hedged tracker? My gains on my global tracker have been hit by the pound strengthening. I think it has lost me about 6% so far this year!
What about SPDR® S&P® 500 UCITS ETF (Acc), ISIN IE000XZSV718, i find it so cheap when compares with iShares Core S&P 500 UCITS ETF acc or even Vanguard S&P 500 UCITS ETF (USD) Acc, why so? Can you make a video compare these 3 ETFs?
yes this year the equal weight underperformed, but historically the returns are almost equal... that could suggest that it will revert back again, or not if you believe each year is a random event (eg like coin flips, the previous ones dont change the future ones...)
So if a share is rising the fund sells to maintain equal weighting and if it’s falling then I have to buy more to maintain weighting. Hmmmm…. Sounds like a flaw to me
I don't see why anyone Long term would pay more to go for an active fund e.g. equal weighted when 96% do not beat the low cost index tracker. So most people should steer clear of their - even you don't seem to use equal weighted funds?
Takes a brave person to meaningfully tilt away from the market cap weighted global index or S&P 500. How much would you need tilt away to have an impact? 20%-50%?
Only if the stocks with the highest caps continue to grow at the highest rate. It's possible that the gulf between the mega-caps and the rest won't continue to grow.
The returns / performance over the last year of the many equal weighted ETFs varies enormously, even though they all charge 0.2%. Why? FX fees? Reinvestment of dividends? Or just poor tracking of small illiquid stocks?
If you are only going off of equal weighted s&p 500, then they definitely aren't small or illiquid stocks. Be definition they wouldn't be included in the s&p500 at all if that was the case.
Absolutely no just for the simplicity of a low cost cap weighted total market index that lets the best companies rise to the top without doing a damn thing on your part.
@@chrisf1600 Honestly I think a mid cap/small cap value ETF tilt is a better way to go at least for us it's been an excellent strategy that last few years.
Surely with equal weighting, you'd have lost out on the big returns since about 2009. And you'll still own more of the shares that are performing badly
thats what I used to say, for next 10 years of growth phase im going all in, then I'll be diversifying 40% under value stock, 40% high yielding dividing stock, 10% corporate bonds. If SP500 takes a big hit I'll see it as a garage sale, even remortgage the house and load up on a load more stock, just keep buying, it always recovers and it recovers hard/fast ;]
@@mixerman8 historically leaning towards small and value will give you higher and more consistent returns , long term. I'm always 30% small cap value, 20% international, 50% s&p 500 in my 401k.
Give it a few weeks and there will be another sponsor. If Ramin says he moved his core holdings to another platform,I would seriously look. Until then, just ignore it and stick to the main uk platforms. I can recite the free trade pitch word for word without notes, the Saxo spiel is almost there too. Time for a new sponsor!!
@@coderider3022 lol exactly what I was thinking! He doesn’t use Saxo and didn’t use Freetrade. He uses Trading 212 and who can blame him Saxo £3 per trade V Trading 212 £0 per trade, Saxo 0.25 FX fee V Trading 212 0.15 FX fee.
Putting well-earned money into the stock market can't be over emphasised for first-time investors, unlike a bank where interest is sure thing! Well, basically times are uncertain, the market is out of control, and banks are gradually failing. I am working on a ballpark estimate of $2M for retirement, and I have a good 6-figure loaded up for this, could there be any opportunity for a boomer like me??
An Equal Weighting fund, kind of enables you to have a quasi small cap type tracker fund. Too risky.... me thinks. Just go for the S&P 600 which has a quality threshold.
I’ll stick with OG because the beauty of cap weighted is that cream floats and turds sink . Equal weight makes the system fail. Excellent analysis as usual.
I had the same thought. "So, if Apple rises the fund will sell it and buy more Nikola even as it plunges towards oblivion? Is that correct? Run that by me again ... on second thoughts, dont bother."
@@Joe-lb8qnIf a stock plunges to oblivian it would eventually be kicked out of the S&P 500. In a sense, the S&P 500 is already full of winners.
@@nighttrain1236 A turd stock can remain in the S&P500 for a long time before it is eventually kicked out
@@nighttrain1236 Too late. They bought it as it fell bought more the more it fell then sold just before oblivion or maybe after the hIndenberg report. I dont regard that as a winning strategy LOL
@@Joe-lb8qn The flip-side is you aren't buying into overvalued stocks and selling when they crash.
The mega-caps come and go over the long run in the S&P 500. Concentration doesn't last.
A similar performance to the cap-weighted S&P 500 since 1994 is quite interesting.
This smoothes out the S&P performance over the long run (vs cap-weighted) albiet at a slight cost penalty.
“Only fell by 55%” very cavalier 😂.
Another great explanation.
“Saxo only has an FX fee of 0.25” lol (Trading 212 FX fee 0.15)
An equal weighted MSCI World Index ETF was launched this month by Invesco
Great analyses as usual, many thanks. It seems to me equal weighted 500 is essentially a diversification play essentially. I loved it you said in the film only 3 ofvthe mag 7 survived (this comes to me every time i hear the phrase!)
Great analysis, so many alternatives, hedging, diversification, under value play, small caps, emerging, etc etc. While I'm in a fund thats multi asset for diverse growth, i'm taking my 2.4ish dividend early January then running to the hills. All in on normal SP500 ETF for next 10 years of growth phase, going to stop watching you tube and ignore the headlines and head down by continuing to load up monthly, then I'll return to see how everyone has compared in performance terms ;]
Nasdaq will open -300 points. Look at NIKKEI futures down 5% now. Last day of quarter is Monday, they will unload their winners. 3pm switch horses to IWM on the low of the day. Mark my words. The SPY chart is clear, leg down Monday.
Thats what everyone thinks evetytime and it gaps up
When it comes to trading strategies, they can be pretty intense for the everyday investor. In reality, these tactics are often executed by the pros who have the expertise and experience to make those trades work. It's all about leveling up your skills and knowledge to play in the big leagues of trading.
Same thoughts, great points. I recently analysed at the general equal weights vs market cap argument and what I found is equal weights don’t really outperform, which was surprising. S&P 500 is an exception to this but even then it depends on the comparison time period. I show how this applies to the broader indices including MSCI world, have a look if you’re interested.
Hi @IncomeBoost42 thanks for sharing that. It's essentially a small cap tilt which will usually outperform in risk rallies and coming out of a selloff period as markets recover. Thanks, Ramin.
I feel i missed the boat with Nivada and maybe Taiwan semiconductors, what do you think about the iShares iShares MSCI Global Semiconductors UCITS ETF Acc GBP for a 5 year hold? Is it likely to out do the S&P500?
Great video, thanks Ramin!
Glad you enjoyed it @shellyperera2010
I'd like to see a fund weighted linearly by a simple rank of market cap. Seems like it would be a nice middle ground between equal weight and that sheer exponential curve.
yes!
In today's S&P500, there is not only a concentration of market cap in the mag7, but there is a concentration in geography (domestic), a concentration in sector (Technology), and concentration in corporate strategy (AI). When the AI bubble bursts, the mag7 will all fall together.
From what I understand EW SP500 performs very similarly to SP400/mid cap
But the Midcap fund has a much lower turnover, so fewer costs incurred from buying and selling.
@@Foogle6594 exactly
That's what I'd expect, because EW S&P 500 for practical purposes turns into a midcap fund. While dominated by the few megacaps, 62% of SP500 companies are mid cap by Morningstar's categorization. This is why I conceptually dislike the EW SP500 -- IMO if I want the midcap tilt, the elegant way, with less buying and selling, is to buy SP100 and SP400 index funds and overweight the SP400 allocation.
Thanks for your efforts, nice video ramin , regards from Minneapolis
A possible use is to have both VOO and a modest allocation to EW to keep the mega stocks but to balance them a bit more with the other 490 holdings.
For simplicity's sake, are there no ETFs or funds which just track the bottom 50% or 75% (or other proportion) of the S & P 500?
That would hardly be a small-cap tracker - the lowest market cap in the 500 is $15B.
Any suggestions?
To the victor goes the spoils reversion to the mean is a myth winners win.
Just look for a midcap fund like the s&p400. They react very similarly to an equal weight fund or to stocks in the bottom half of the s&p500 but have much less turnover and the losses associated.
Amundi have just launched 2 etf based on msci usa, one with all the stocks with a market cap superior to 200 billions and the other with all the stocks under 200 billions. They are domicilied in ireland
Thank you !
You're welcome @izwaterloo
Fair dinkum. Good summary too.. thanks Ramin
My pleasure @Scott-ll9rb
All very interesting and useful but I have one big anxiety about my investments and that is the US National Debt of $34 trillion rising every second by 100s of thousand and I'd love to have a video on that topic. There's so many frightening predictions out there coupled with the soaring price of gold. A weighty video from you might help calm my and other's fears.
The debt is $34 trillion
@@thomasmcdonald5542 Thanks for that correction. I've duly altered my post.
The big challenge at the moment for US denominated EFS at the moment is the very strong momentum of the £ vs the $. Despite the S&P hitting all time highest UK based ETFs like VUAG are lower per share due to the strong £. It looks like the £ is going to continue strengthening for a while at least.
It's only strengthening due to the given belief that the BOE are a little more reluctant to currently cut rates at a fast pace going forward compared to the US. That can literally change in an instant. Some data, higher unemployment, inflation coming in much lower than expected number and the situation could change rapidly.
Why not have a mixed portfolio of S&P indexed fund and small-cap indexed fund? This also keeps the costs low, compared to an EW fund.
Hi @jayaramr that's a good idea and pretty close to what I do personally. This was more about equal weight rather than alternatives, but maybe I should have mentioned that possibility... Thanks, Ramin.
The great Jack Bogle once said that using any weightage other than market cap can be quite cumbersome and more expensive, and may not achieve what we are after - that is, better returns.
But I do agree that analysing the pros/cons of the EW approach can be informative.
This is my “personal” take.
1) I invest in a market weighted fund because my entire portfolio is tied up in my sipp in vanguard.
They don’t offer equal weighted.
2) personally I won’t mind having an equal weighted index fund but it’s way too much effort at this point.
3) like ramy mentioned, they’re magnificent for a reason, relying on market weighted index fund is like saying to the world, here’s my money, may the best companies receive it.
Thank You.
You're welcome @DPTrainor1
I hold mainly a global index but was looking at diversifying with a global value factor etf. Maybe this is another good option to throw in the mix!
Hi Ramin. According to Investor's Chronicle, the Invesco S&P 500 Equal Weight ETF (SPEQ) only fell 0.7% in 2022, vs 8.1% for market cap ETFs. In 2024 SPEQ has grown 17.3% compared to 26%. This suggests lower volatility, at least recently. What do you think?
The world changes, but one thing is for sure, the world is becoming even more reliant on tech, and this is not going to change, certainly not in the next 20 years, it's only going to increase.
Be interested now we have cheap investment apps, if you just bought the S&500 top 30 stocks in the same % would they beat the index ?
Probably, because you'd have a bigger percentage of the top few mega tech companies. The big question is whether that strategy will work for the next 5 years.
Great as usual
Thank you! Cheers @ivivivir
Quiz question: when is an index fund not an index fund? I see indexes are been created at a rate that puts even the growth of US equity to shame. Is an active fund that "uses a tried a tested method of stock picking" also an index fund? US equity ex mega 8 is still not cheap?
It is surprising to me that there is not more difference in performance over sensible periods of time eg the last 30 years. It occurs to me to wonder: how would a contrarian (so to speak) "anti market cap index" have fared, where the proportion of stocks invested any one company was *inversely* proportional to its market cap share? Hugely more volatile, I suppose, but what would the long-term overall performance look like?
But equal waiting has been trailing and lagging Cap weighted
if you have the index side by side, you will realize baring the recent 2023 to current performance the equal weighted has better performance.
What about the merits of a Sterling hedged tracker? My gains on my global tracker have been hit by the pound strengthening. I think it has lost me about 6% so far this year!
What about SPDR® S&P® 500 UCITS ETF (Acc), ISIN IE000XZSV718, i find it so cheap when compares with iShares Core S&P 500 UCITS ETF acc or even Vanguard S&P 500 UCITS ETF (USD) Acc, why so?
Can you make a video compare these 3 ETFs?
Hi. Ramin, are the dividends in SCHD reinvested or paid out,
Also, how can I buy into it as it’s not in HL or 212 ? Thanks
Guess you prefer having as much Boeing as NVIDIA in your index tracker this year?
yes this year the equal weight underperformed, but historically the returns are almost equal... that could suggest that it will revert back again, or not if you believe each year is a random event (eg like coin flips, the previous ones dont change the future ones...)
So if a share is rising the fund sells to maintain equal weighting and if it’s falling then I have to buy more to maintain weighting. Hmmmm…. Sounds like a flaw to me
I'm no expert, but government debt doesn't work the same as household debt and higher inflation does reduce the amount of debt
there is also a new msci world equal weighted.
I don't see why anyone Long term would pay more to go for an active fund e.g. equal weighted when 96% do not beat the low cost index tracker. So most people should steer clear of their - even you don't seem to use equal weighted funds?
Takes a brave person to meaningfully tilt away from the market cap weighted global index or S&P 500. How much would you need tilt away to have an impact? 20%-50%?
Can never find an equal weight S+P500 index on a uk platform? Any ideas where to find one
Invesco have one on invest engine
Trading 212 have a number of EW ETFs. Mostly iShares
Won't an equal weight fund just keep selling the companies doing well to buy the ones doing bad?
Cutting your flowers and feeding you weeds surely?
Only if the stocks with the highest caps continue to grow at the highest rate. It's possible that the gulf between the mega-caps and the rest won't continue to grow.
now think abt when stocks are ranging...
Only 3 lived. 😄
The returns / performance over the last year of the many equal weighted ETFs varies enormously, even though they all charge 0.2%.
Why? FX fees? Reinvestment of dividends? Or just poor tracking of small illiquid stocks?
If you are only going off of equal weighted s&p 500, then they definitely aren't small or illiquid stocks. Be definition they wouldn't be included in the s&p500 at all if that was the case.
Natural assumption here is that you only looked at capital returns not total returns.
Absolutely no just for the simplicity of a low cost cap weighted total market index that lets the best companies rise to the top without doing a damn thing on your part.
For those best companies to rise, last year's best companies must fall. Net/net, it's not obvious that market cap has any advantage.
@@chrisf1600 Honestly I think a mid cap/small cap value ETF tilt is a better way to go at least for us it's been an excellent strategy that last few years.
I thought Saxo was Danish...
Danish / Chinese / Finnish apparently
Juggernauts and tiddlers bravo.
Surely with equal weighting, you'd have lost out on the big returns since about 2009. And you'll still own more of the shares that are performing badly
Market cap global is ok , but only S&P 500 is a recipe for disaster. NEVER put all your eggs in one basket.
thats what I used to say, for next 10 years of growth phase im going all in, then I'll be diversifying 40% under value stock, 40% high yielding dividing stock, 10% corporate bonds. If SP500 takes a big hit I'll see it as a garage sale, even remortgage the house and load up on a load more stock, just keep buying, it always recovers and it recovers hard/fast ;]
@@mixerman8 historically leaning towards small and value will give you higher and more consistent returns , long term. I'm always 30% small cap value, 20% international, 50% s&p 500 in my 401k.
Anyone using saxo? Thoughts?
Give it a few weeks and there will be another sponsor. If Ramin says he moved his core holdings to another platform,I would seriously look. Until then, just ignore it and stick to the main uk platforms. I can recite the free trade pitch word for word without notes, the Saxo spiel is almost there too. Time for a new sponsor!!
@@coderider3022 what brokers do you think are trust worthy ?
@@coderider3022 lol exactly what I was thinking! He doesn’t use Saxo and didn’t use Freetrade. He uses Trading 212 and who can blame him Saxo £3 per trade V Trading 212 £0 per trade, Saxo 0.25 FX fee V Trading 212 0.15 FX fee.
@@coderider3022Exactly what I was thinking lol 😂
@@coderider3022 Exactly what I was thinking lol 😂
Putting well-earned money into the stock market can't be over emphasised for first-time investors, unlike a bank where interest is sure thing! Well, basically times are uncertain, the market is out of control, and banks are gradually failing. I am working on a ballpark estimate of $2M for retirement, and I have a good 6-figure loaded up for this, could there be any opportunity for a boomer like me??
An Equal Weighting fund, kind of enables you to have a quasi small cap type tracker fund. Too risky.... me thinks. Just go for the S&P 600 which has a quality threshold.
First