Equal Weight vs Market Cap Weight

Updated: Nov 27, 2018

Karl asks, what's your optimum weight?

Indexing has become mainstream and an increasingly popular way to invest in capital markets. It’s cheap, tax efficient and gives you roughly the same return as the market. Most portfolios track an index that is weighted based on market capitalisation (cap-weighted); individual weights are determined by dividing the company’s market cap by the sum of all constituents’ market caps. There is a growing trend in the academic and investing community that this weighting method could be suboptimal. Could an alternative approach add value to a passive portfolio?

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www.goodreturns.co.nz

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This information is general information only and does not take account of your individual investment objectives or financial situation.
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