Comments on: S&P TSX 60 Equal-Weighted Index http://www.investingintelligently.com/2005/12/23/sp-tsx-60-equal-weighted-index/ Not just another (Canadian) financial blog Thu, 09 Sep 2010 14:14:49 +0000 http://wordpress.org/?v=abc By: Dave http://www.investingintelligently.com/2005/12/23/sp-tsx-60-equal-weighted-index/#comment-602 Dave Wed, 14 Jun 2006 04:41:28 +0000 http://www.investingintelligently.com/?p=119#comment-602 Mark: great to hear from someone from Shaunessey. I also really believe that equal-weighting is the way to go. Mark: great to hear from someone from Shaunessey. I also really believe that equal-weighting is the way to go.

]]> By: Mark http://www.investingintelligently.com/2005/12/23/sp-tsx-60-equal-weighted-index/#comment-601 Mark Wed, 14 Jun 2006 02:55:09 +0000 http://www.investingintelligently.com/?p=119#comment-601 Dave: there are many reasons an equal weighted approach works and we've researched it quite a bit .... see our web site for some of the information ... I'm sorry we haven't got a pool for a broader index market but we do manage 2 ETFs both of which equal weight Canadian income trusts .. one ie IEP.UN and the other EQL.UN ... Dave: there are many reasons an equal weighted approach works and we’ve researched it quite a bit …. see our web site for some of the information … I’m sorry we haven’t got a pool for a broader index market but we do manage 2 ETFs both of which equal weight Canadian income trusts .. one ie IEP.UN and the other EQL.UN …

]]> By: Investing Intelligently » Blog Archive » Non-Market Cap Weighted Indexes: The Next Big Thing http://www.investingintelligently.com/2005/12/23/sp-tsx-60-equal-weighted-index/#comment-137 Investing Intelligently » Blog Archive » Non-Market Cap Weighted Indexes: The Next Big Thing Thu, 09 Feb 2006 21:07:00 +0000 http://www.investingintelligently.com/?p=119#comment-137 [...] 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. [...]

]]> By: Anonymous http://www.investingintelligently.com/2005/12/23/sp-tsx-60-equal-weighted-index/#comment-63 Anonymous Mon, 02 Jan 2006 01:10:33 +0000 http://www.investingintelligently.com/?p=119#comment-63 Gotcha. In your last paragraph, I thought it was the former you didn't like. Gotcha. In your last paragraph, I thought it was the former you didn’t like.

]]> By: Dave http://www.investingintelligently.com/2005/12/23/sp-tsx-60-equal-weighted-index/#comment-57 Dave Mon, 26 Dec 2005 08:39:32 +0000 http://www.investingintelligently.com/?p=119#comment-57 Good question, I have a few posts which might help to answer this question: <a href="http://www.investingintelligently.com/2005/12/06/is-the-sp-500-a-passive-index-or-an-actively-managed-mutual-fund" rel="nofollow">Is the S&P 500 a passive index or an actively managed mutual fund?</a> <a href="http://www.investingintelligently.com/2005/12/07/sp-500-equal-weighted-index" rel="nofollow">S&P 500 equal-weighted index</a> But I guess I should have qualified that statement a bit more. I am not a big fan of market-cap-weighted indexes as an investment. The way they operate simply does not make sense. Take an extreme example. Imagine if one company's market share continued to grow and grow and grow. Eventually it would consume the whole index, and the index would no longer be a representative list of stocks, but a single stock. This could happen with the XIU index for example. After Nortel's huge surge in market cap in late 1990s and early 2000s, the XIC (capped index) was born. Would you allow this kind of thing to happen in your own portfolio? The purpose of market-cap based indexes is to represent the currently traded value of the market and market-weighting is the correct way to do this. But it isn't a sound way to invest in a basket of stocks. Good question, I have a few posts which might help to answer this question:

Is the S&P 500 a passive index or an actively managed mutual fund?
S&P 500 equal-weighted index

But I guess I should have qualified that statement a bit more. I am not a big fan of market-cap-weighted indexes as an investment. The way they operate simply does not make sense. Take an extreme example. Imagine if one company’s market share continued to grow and grow and grow. Eventually it would consume the whole index, and the index would no longer be a representative list of stocks, but a single stock. This could happen with the XIU index for example. After Nortel’s huge surge in market cap in late 1990s and early 2000s, the XIC (capped index) was born. Would you allow this kind of thing to happen in your own portfolio?

The purpose of market-cap based indexes is to represent the currently traded value of the market and market-weighting is the correct way to do this. But it isn’t a sound way to invest in a basket of stocks.

]]> By: Anonymous http://www.investingintelligently.com/2005/12/23/sp-tsx-60-equal-weighted-index/#comment-56 Anonymous Sun, 25 Dec 2005 17:00:33 +0000 http://www.investingintelligently.com/?p=119#comment-56 Why are you "not a fan" of market-cap-weighted indexes? Why are you “not a fan” of market-cap-weighted indexes?

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