I was just speaking with a (potential) financial advisor today. He discussed, for example how the S&P 500 is way overweighted in tech, particularly because 7 of the top 10 holdings are all megatech giants: Apple, Microsoft, Amazon, NVIDIA, Google/Alphabet (twice), and Tesla. These 7 alone make up 21% of the value of the S&P 500.
Obviously, this leads to underweighting in other sectors. And this leads to underperformance and increased volatility over long periods of time. As evidence of this, he brought up a chart that showed that if you equally weight your investments across the various sectors (financials, materials, utilities, healthcare, etc.), that it would outperform the S&P 500, provided that you rebalance periodically.
Has anyone heard of an investment portfolio like this? I did a little research, and it looks like for periods of 15 years or greater, this is right - an portfolio that's equally weighted by sector, and rebalanced periodically, will outperform the S&P by 1.5% to 2% annually.
I'd love to hear your thoughts about this. Anyone have a portfolio like this? Is there some kind of equal weighting ETF or mutual fund that does this automatically? Thanks.
Submitted February 28, 2023 at 04:15AM by jgroub https://ift.tt/MyZLxb8
