Disclaimer: No investment advice or recommendation, this article is for information purposes only. Before you decide on an ETF, take a closer look at it in terms of positions, sampling, regions, etc. I can't describe everything here as it would go beyond the scope of this article.

Part 1 (Definition, Categories

& Z-score and quality factor): https://getqu.in/RCSY4a/

Part 2 (Value ETF): https://getqu.in/Nfnhqb/

Part 3 (Low Volatility ETF): https://getqu.in/Ub7KpG/

Part 4 (Momentum ETF): https://getqu.in/CNMgGw/

Part 5 (Small- and Growth ETF): https://getqu.in/0NoqmW/

Part 6 (Dividend ETF): https://getqu.in/NJtoF5/

Part 7 (Multifactor ETF): https://getqu.in/qBLxfo/

What are Equal-Weight ETF?

Equal-weight ETFs are - as the name suggests - characterized by the fact that the positions held in the ETF are all equally weighted and not, as is usually the case, according to their market weighting. The investment case for this form of investment is based in particular on the observation of the recent past that the weighting of indices is becoming increasingly concentrated on a few stocks/sectors and countries. For example, the top 10 positions in the S&P 500 already account for 33% of the index weighting. The global comparison is no different: In the Euro Stoxx 600, the top 10 account for around 20 % of the weighting and in the MSCI World around 24 % and this with over 1,400 positions (!). The USA accounts for 70 % of the MSCI World and the technology sector is weighted at around 27 %. The market capitalization often no longer corresponds to the GDP weighting of the respective countries (as a measure of a country's economic strength).

With free trade and globalization, this is not too bad, as companies can generate a large proportion of their profits abroad. However, with increasing protectionism and the reversal of free trade, this discrepancy can become a risk.

Due to the high concentration, the return of the indices essentially consists of a few large companies with a strong US focus. This creates a cluster risk, although this has paid off well in the recent past (

https://stock3.com/boersenwissen/gleich-vs-kapitalisierungsgewichtet-gibt-es-einen-gewinner-13016464)

The Equal-Weight ETFs are therefore created for all those who are concerned about the growing concentration on the markets and want to spread the risk over more shoulders.

Furthermore, there is a natural size-tilt, as both small and large companies are equally weighted in the index, meaning that a much higher weighting is placed on small and mid-caps compared to the normal indices.

Historical returns

The charm of the equal weight approach becomes apparent if we look beyond the recent past to a longer-term horizon:

https://www.betashares.com.au/files/collateral/brochure/QUS-Brochure.pdf

Annualized comparison of annual returns (negative = outperformance of the equal weight approach):

https://stock3.com/boersenwissen/gleich-vs-kapitalisierungsgewichtet-gibt-es-einen-gewinner-13016464

In a study from 1994 to 2000, the returns already converge strongly:

https://www.lynalden.com/equal-weighted-index-funds

Overall, the picture is similar to the size-premium - logically, since size stocks are also more strongly represented - in the long term, the equal-weight approach would be worthwhile, but in the recent past, due to the tech/Us concentration, one would have achieved an underperformance. The higher weighting of smaller stocks also increases volatility, something that would probably not have been expected as many take the equal weight approach to minimize risk.

👉Equal-Weight ETF:

-$TSWE (-4,45 %) (World | TER 0.20 % | TD 0.47 % | EUR 0.8 bn invested volume | 3Y underperformance vs All-World -11 %pt. | 5Y underperformance -14 %pt. | 10Y underperformance -30%pt.)

• Index methodology: Selection of 250 companies according to Moody's sustainability criteria (no alcohol, gambling, military, animal testing for cosmetics etc.), then equal weighting.

-$XDEW (-5,23 %) (US | TER 0.20 % | TD -0.02 % | EUR 12 bn invested vol. | 3Y underperformance vs. S&P 500 -18%pt. | 5Y underperformance -36 %pt. | 10Y underperformance -114 %pt.)

• Index methodology: Equal weighting of all companies included in the S&P 500.

-$MOTV (US | TER 0.46 % | TD n.a. | EUR 0.1 bn invested vol. | 6 months outperformance vs. S&P 500 +0.5%pt.)

• Index methodology: Index focuses on Morningstar's "Wide Economic Moat" rating. These are companies that Morningstar analysts believe will outperform over the next 20 years. From these companies, the most undervalued are filtered (delta market price to fair value). The companies are then equally weighted

-$WEBA (-5,26 %) (US | TER 0.07 % | TD n.A. | EUR 0.5 bn invested vol. | 1Y underperformance vs. NASDQ -17 %pt.)

• Index methodology: Equal weighting of NASDAQ100 stocks

-$S6EW (-6,02 %) (Europe | TER 0.30 % | TD 0.06 % | EUR 0.1 bn invested vol. | 3Y underperformance vs. Euro Stoxx 600 -15%pt. | 5Y underperformance -18 %pt. | 10Y underperformance -11 %pt.)

• Index methodology: Screening of the Euro Stoxx 600 according to - UN defined - ESG criteria (no coal, weapons, tobacco,..) and subsequent equal weighting.

Conclusion - what remains?

Equal weight strategy aims to reflect the high concentration of stocks/sectors & countries much less in the conventional indices (which are market capital weighted) by including the stocks in equal proportions. This reduces the cluster risk while at the same time increasing the exposure of smaller and medium-sized companies.

In the long term, however, there has been outperformance in recent times (with the tech boom). In my view, there is a strong performance overlap with the small-cap ETFs, so I would definitely not put both in my portfolio & would rather stick with a small-cap ETF, partly because the current selection of equal-weight ETFs is not yet too broad.

The choice between equal-weight and market-cap ETFs ultimately depends on individual risk tolerance, investment horizon and assessment of future market developments. Equal-weight ETFs can serve as a diversification instrument in a balanced portfolio.

#smartbeta
#etf
#equalweight

So, after my lukewarm stumble onto the stage of the community recently, now for real:

Hello everyone (friendly nods to all),

I've been a mostly silent reader for a while now, but I'd like to introduce myself - even if I don't know what I'm up to - in keeping with local custom:

I am 55 & a civil servant in the Federal Civil Service, which puts me in the fortunate position (I hope) of not having to rely on additional income from investments for a materially bearable retirement (in twelve years' time, I would just about reach retirement without deductions after 40 years in the civil service). Investment is therefore essentially a consumption alternative, a safety cushion and - later - intended for my sons (living with their mother, 17 & 13 years old; each with their own portfolios / savings plans). My investment horizon is therefore open ended (or determined biologically or by the legitimate major needs of the offspring).

My investment history - still perceptible in the portfolio presented here - begins in 1996/1997 with the first (and later unfortunately also the second) placement of the $DTE (-4,46 %) T-share and the IPO of $PSM (-1,62 %) ProSieben (which has since more than made up for its initial investment through dividends, good boy). At some point, he inherited the current e.on position from his grandparents $EOAN (-6,15 %) e.on position and a position in $VOW3 (-4,37 %) Volkswagen, which I sold several years later on the advice of my savings bank at the time (bygones).

Then nothing for a long time (studies/traineeship, career start - I was "investing in my current account" and couldn't even manage to process my business trip expenses on time, tststs).

With a wife and children came the need to make provisions (the little guys simply cost a tidy sum through the cycle), which I initially did through sporadic ad hoc investments:

In particular hubris, at the beginning of the subprime crisis I trusted the investment banks to have everything under control and bought shares in $DBK (-10 %) Deutsche Bank (close to ATH), Bear Stearns and Merrill Lynch (the relics can be found as a minus at $BAC (-7,71 %) Bank of America for Bear Stearns and - invisibly - a tax loss carryforward to offset the now quite respectable $JPM (-7,37 %) J.P. Morgan position for Merrill Lynch), $DBK (-10 %) with additional purchases slowly creeping back into a "perhaps at some point back to zero" zone.

Otherwise, a number of active funds ($n/a LU0557858130, $n/a LU1143163779, $n/a IE00BG7PHW03, $n/a (-6,32 %) LU1496713741, $n/a (-0,04 %) DE0008474750, $n/a GB0030932676, $n/a (-6,74 %) LU1864952335 and predecessors), of which only $n/a (-4,52 %) Pictet Water had actually performed noticeably positively on a time-weighted basis.

From around 2015, I then gradually started to populate the current portfolio with various equity and ETF savings plans at ING ($GOOG (-2,49 %) Alphabet C, $AAPL (-6,8 %) Apple, $KO (-3,58 %) Coca-Cola, $NESN (-3,88 %) Nestlé, $BAYN (-6,12 %) Bayer (ouch!), $SIE (-7,45 %) Siemens, $DIS (-6,12 %) Walt Disney, $PFE (-4,59 %) Pfizer, $PR1J (-3,5 %), $FLXC (-5,33 %), $FLXK (-1,98 %), $EXS1 (-5,79 %), $LCUK (-6,42 %), $C060, $XMUS (-5,56 %), $DBXW (-4,56 %), mostly at 50 euros/month), supplemented by a few nicely timed individual purchases in $AAPL (-6,8 %) , when it was still trading at around 80 euros before the 3:1 stock split, as well as $MT (-7,3 %) AcelorMittal and $BHP (-7,33 %) (mini position, but with a nice dividend yield since then).

With supply chain problems and inflation emerging at the end of corona/beginning of Ukraine, I then started to invest in another portfolio, the actually far too expensive $SPAG (-4,88 %) iShares Agribusiness and $EXV6 (-8,05 %) iShares STOXX Europe 600 Basic Resources as a hedge against the rising cost of living that had gone wrong (had bet on more pronounced sectoral greed-flation).

Since I have since followed the recommendations of $VWCE (-5,52 %) resp. $ACWI (Glashaus!) in the meantime, the aggregated lump and the $AAPL (-6,8 %) and $GOOG (-2,49 %) was getting a bit scary, but I didn't want to touch the corresponding equity savings plans (more on this in a moment), I put my basic trust in the long-term out-performance of the US equity market into practice by investing in two "equal weight" index funds, namely with $WEBA (-5,26 %) on the NASDAQ100 (also with a savings plan) and $XDEW (-5,23 %) on the S&P500 (one-off investment only).

Some of this, especially the earlier investment history, is foreign to my Getquin portfolio history, as I only entered this after a portfolio reorganization in early 2023.

Over the years, my employer has steadily introduced stricter regulations for private financial transactions, which currently makes it practically impossible for me to invest in individual names or funds with certain predominant industry shares. However, in an exemplary manner under the rule of law, previously existing savings plans were protected in the respective iterations of the tightening, so that I jealously continue the remaining share savings plans (see above lump at $GOOG (-2,49 %) and in particular $AAPL (-6,8 %)).

I currently save monthly as follows (savings rate): Grandfathering: $GOOG (-2,49 %) (100), $AAPL (-6,8 %) (50), $DIS (-6,12 %) (50), $PFE (-4,59 %) (50), $KO (-3,58 %) (50); "regular": $VWCE (-5,52 %) (currently 520 with annual 4% dynamic), $SPAG (-4,88 %) (100), $WEBA (-5,26 %) (100), $EXV6 (-8,05 %) (100), $10AJ (-3,88 %) (100) and - before first-time execution - (100). $SDIP (-5,66 %) (100).

In addition, I have reflected certain market assessments at the respective point in time through individual purchases in country ETFs (long-term catch-up potential of the emerging markets through $HMEF (-4,89 %), $FLXC (-5,33 %), $FLXK (-1,98 %) - $FLXI (-2,8 %) was now too expensive for me and the Indian economy was not sufficiently represented by companies listed there; the sleeping innovation giant Japan through $PR1J (-3,5 %), "luxury always works" even in times of inflation through $DX2G (-4,8 %)Europe - especially CH and UK - as a general counterweight to the US through $VEUR (-5,74 %) and the sensible Nordics by $XNZN (-5,73 %)), so that there is now a colorful bouquet of ETFs. However, I am not fundamentally dissatisfied with this, especially as far as these are distributing & savings plan-capable in my ING portfolio, so that their distributions (from 75 euros) are automatically reinvested ($VEUR (-5,74 %) - is so large that this could work for each of the quarterly distributions, $DX2G (-4,8 %), $PR1J (-3,5 %)).

I think that as long as I am still subject to my employer's investment restrictions, I will only make marginal changes to this. For a "fire and forget" portfolio, however, I could imagine switching to a 70/20/10 portfolio in the medium term. $WEBG (-4,43 %), $HMEF (-4,89 %), $SDIP (-5,66 %) (@ING: please $SDIP (-5,66 %) savings plan, thank you!). Let's see what the end of PFOF brings on the cost side, especially for savings plans.

So, that's it; thanks for your patience and perseverance. You're welcome to give me tips, but as I said, my hands are largely tied (and I don't think much of the crypto tulip bulbs until they become an actual means of payment, not just for buying sinister services on the dark web)...

Here's to a successful investment community (&thanks for having me)!