Equal Weight Calculator
Compare equal weighted vs market cap weighted portfolios
Portfolio Assets
Allocation Comparison
Portfolio Metrics
Equal Weight
Concentration
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Market Cap
Concentration
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Diversification Analysis
Detailed Allocation Breakdown
| Asset | Market Cap ($B) | Market Cap Weight | Equal Weight | Difference | Impact |
|---|
When to Use Equal Weighting
Better Diversification
S&P 500 market cap: Apple 7%, Microsoft 6%, tiny stocks 0.01%. Equal weight: all 500 stocks get 0.2%. No single company dominates. True diversification across all holdings.
Small Cap Premium
Equal weight S&P 500 outperformed cap-weighted by 1.5% annually since 1990. Why? Higher small/mid cap exposure captures size premium. Small companies grow faster than giants.
Rebalancing Alpha
Equal weight forces selling winners, buying losers. Quarterly rebalancing captures mean reversion. Buy Tesla when it drops from 3% to 1%, sell when it rises to 5%. Systematic contrarian investing.
Crypto Portfolio Balance
Market cap crypto: 60% BTC, 20% ETH, 20% others. Equal weight: 10 coins get 10% each. Better captures altcoin seasons when smaller coins outperform. More balanced exposure to crypto innovation.
Avoiding Concentration Risk
2000 tech bubble: Cisco was 4% of S&P 500. When it crashed 80%, cap-weighted portfolios got hammered. Equal weight limits any single stock to small %. Protects against concentration blowups.
Sector Rotation Benefits
Market cap overweights whatever's hot (tech in 2020s). Equal weight maintains balanced sector exposure. When leadership rotates from tech to value, equal weight is positioned. Less momentum, more balance.
Frequently Asked Questions
What is equal weighting?
Gives each asset same percentage regardless of size. 10 stocks = 10% each. Market cap gives larger companies bigger allocations. Equal weight provides more diversification and small cap exposure.
Equal vs market cap weight?
Market cap: Apple 7%, small stocks 0.1%. Equal weight: All same %. Equal weight has higher small cap exposure, better diversification, more volatility. Historically outperforms due to small cap premium.
Benefits of equal weighting?
Better diversification—no single stock dominates. Higher small cap exposure. Reduces concentration risk. Rebalancing alpha from selling winners, buying losers. Equal weight S&P 500 outperformed cap-weighted by 1-2% annually.
Drawbacks of equal weighting?
Higher volatility from small cap exposure. More trading costs from rebalancing. May underperform when large caps dominate (2010s tech). Higher turnover creates tax drag in taxable accounts.
Rebalancing frequency?
Quarterly most common. Monthly too frequent (high costs). Annual allows too much drift. Quarterly balances benefits with costs. Some use threshold-based (rebalance when any asset deviates 5%+ from target).
Equal weight for crypto?
Works well for crypto diversification. Instead of 60% BTC, 20% ETH (market cap), equal weight gives each 10-20%. Captures altcoin upside better. Higher volatility and rebalancing needs. Good for broad crypto believers.
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