Equal-Weighted Index Definition

Learn the definition of equal-weighted index and other ETF terminology from the etf.com glossary.

Reviewed by: etf.com Staff
Edited by: etf.com Staff

Learn more about Equal-Weighted Indexes

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


ETF Glossary is etf.com’s collection of key terms and definitions related to exchange-traded funds. ETFs are investment funds that are traded on stock exchanges, and they can encompass a wide range of asset classes, including stocks, bonds, commodities and more. Given the diverse range of ETFs and the complexity of financial markets, having a clear understanding of ETF-related terminology is instrumental for investors looking to make informed decisions, manage risks effectively and navigate the evolving landscape of ETF investments.