Equal-Weighted Index Definition
Learn the definition of equal-weighted index and other ETF terminology from the etf.com glossary.
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An Equal-Weighted Index, in the realm of ETFs, deviates from traditional market-cap-weighted indices by assigning the same weight to each constituent regardless of its market capitalization. This innovative approach provides investors with a more balanced representation of the entire index, mitigating the dominance of sectors and larger companies. Equal-weighted ETFs offer a diversified exposure to a broad range of securities, fostering a more democratic distribution of risk and return. Investors gravitate towards these ETFs for a comprehensive and inclusive investment strategy that aligns with the principle of diversification by reducing concentration risk associated with market-cap-weighted indices.
Related Terms
Market Capitalization, Diversification