http://www.investingintelligently.com/2005/12/07/sp-500-equal-weighted-index/ Not just another (Canadian) financial blog Sat, 16 Oct 2010 15:22:19 -0700 http://wordpress.org/?v= hourly 1 http://www.investingintelligently.com/2005/12/07/sp-500-equal-weighted-index/comment-page-1/#comment-138 Investing Intelligently » Blog Archive » Non-Market Cap Weighted Indexes: The Next Big Thing Thu, 09 Feb 2006 21:13:24 +0000 http://www.investingintelligently.com/?p=104#comment-138 [...] I predict that within the next 10 years we will see a wave of new index ETFs and index/passive mutual funds. Almost all indexes currently available (and the ETFs and mutual funds that track them) are market-cap weighted. The technique that is usually used is that the stocks in some set (all Canadian stocks for instance) are sorted by their market capitalization (and other factors as well, but market cap is the dominating one). The index is then made up of the first n stocks in that list, where n is however many stocks should be in the index. These indexes may suit the media or other people interested in tracking “the market,”, but there are many disadvantages to using this form of indexing as an investment, and investing my money in market-cap weighted indexes is a very non-intuitive way to to invest. I have talked about some of the disadvantages of market-cap based indexes here: past articles. Non-market cap weighted indexes have a huge advantage over their market-weighted counterparts. I have discussed this in past articles using examples in the Canadian market and the US market. [...] [...] I predict that within the next 10 years we will see a wave of new index ETFs and index/passive mutual funds. Almost all indexes currently available (and the ETFs and mutual funds that track them) are market-cap weighted. The technique that is usually used is that the stocks in some set (all Canadian stocks for instance) are sorted by their market capitalization (and other factors as well, but market cap is the dominating one). The index is then made up of the first n stocks in that list, where n is however many stocks should be in the index. These indexes may suit the media or other people interested in tracking “the market,”, but there are many disadvantages to using this form of indexing as an investment, and investing my money in market-cap weighted indexes is a very non-intuitive way to to invest. I have talked about some of the disadvantages of market-cap based indexes here: past articles. Non-market cap weighted indexes have a huge advantage over their market-weighted counterparts. I have discussed this in past articles using examples in the Canadian market and the US market. [...]

]]>