Morningstar Minute: Do equal-weighted ETFs have an edge?

For diversified Canadian equity ETFs, the traditional market-cap-weighted approach has yielded better results, but some sector-specific equal-weighted funds have outperformed.

Jeffrey Bunce, CFA 15 June, 2017 | 5:00PM

 

 

Jeffrey Bunce: Market-cap-weighted indices are ideal for low cost, passive investing, and this methodology is good for capturing broad market gains. A market-cap-weighted ETF, for the most part, is self-balancing and a low-turnover proposition. This keeps costs down and lets investors capture more of the index's return. In some instances though, market-cap-weighted indices may compromise diversification.

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About Author

Jeffrey Bunce, CFA

Jeffrey Bunce, CFA  Jeffrey Bunce, CFA, is a senior investment analyst for Morningstar’s Investment Management group.

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