Can You Beat the S&P 500 with an Index Fund?

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For Immediate Release

Chicago, IL - Investors focus in on the S&P 500 as a benchmark, and for good reason. The index is one of the most popular, liquid, and diversified benchmarks out there. But is there an easy way to beat its performance with a slight strategy tilt? We explore this idea in the latest edition of the Dutram Report and get to the bottom of the 'equal weight' strategy. To listen to the podcast, click here: ( )


The S&P 500 is the benchmark for most investors.

The important stock index consists of 500 of the largest companies that are listed on the NYSE or the Nasdaq, and securities are weighted in the benchmark by market capitalization levels. Currently, top stocks in the benchmark include Apple AAPL at about 3.6% of the total, Microsoft MSFT at 2.5% of the total, and Exxon Mobil XOM at 1.65%.

But while this approach is a great barometer for market health, is it the best way for investors to put their money to work? Investors have numerous options in this department, including products like SPY , VOO , or IVV , as these simply follow the benchmark exactly as laid-out by the index creators. But is there a potentially better way?

Enter Equal Weight

In this edition of the Dutram Report , I look for an alternate approach in a talk to Michael Willis, the lead portfolio manager of INDEX Funds . His key product, the Index Funds S&P 500 Equal Weight INDEX takes the same S&P 500 stocks, but invests in them equally.

This means that instead of Apple accounting for nearly 4% of the total, or Microsoft making up 2.5% of the fund, each account for roughly 0.2% of the total, at least at rebalancing dates. And not just the mega caps, but each and every stock comes with this same weight, giving the fund an equal interest in giants like Exxon, and the smallest S&P 500 components alike.

While this might sound like a small difference, we go over in the podcast how this actually ends up being something very important to overall returns. Michael discusses how nearly half of the S&P 500 (market cap weighted) is tied up in about 50 companies, and that the remaining 450 have to fight over the remainder. He argues that the equal weight is a much more balanced way to achieve exposure, while the fund's fact sheet shows that this approach has outperformed the market over long time periods.

We also talk about the pros and cons of this approach, such as its potentially heavier weighting in mid-cap securities and what this means for investors, as well as some important fund specifics. This includes information regarding the cost and minimum investment, and also the reason for selecting a fund structure. We then go over the ways that INDEX differs from the ETF counterpart out there, the Guggenheim S&P 500 Equal Weight ETF RSP , looking beyond the lower cost of INDEX when compared to the Guggenheim fund.

Bottom Line

Equal weight investing is an overlooked strategy for targeting stocks, but it is clearly one that can lead to outperformance over long time periods. If you are curious about this approach, check out this podcast for everything you need to know about how it works, and if this can help improve returns for long-term investors.

So, make sure to listen to this edition of the Dutram Report for a closer look at equal weight investing, and what the pros and cons of this approach are for those seeking a different way to play the S&P 500. And if you have any thoughts or comments, reach us on SoundCloud, or at podcast @ for email. We'd love to know what you think of this chat, and if you have any other topics you'd like us to cover in the future too.

But for more news and discussion regarding the world of ETFs, make sure to be on the lookout for the next edition of the Dutram Report , and check out the many other great Zacks podcasts as well!

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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit for information about the performance numbers displayed in this press release.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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