Equal Weighting: Portfolio & Mutual Fund Strategies Explained

The Equal weight system is a method of relating two separate financial things together, in this case a portfolio of stock and a mutual fund. Weighting allows small companies to be given the same amount of importance as large companies, putting them onto an even playing field. An equal-weight index could tend to have a higher turnover of shares than the market-capped version, and this could inspire higher costs and fees.

Equal Weighting Stocks

If you put your portfolio of stocks into an equal weight system, then you will find that smaller companies, who would traditionally have cheaper stocks, and would be less noticeable, will have a greater presence in the stock market. This can influence their share price to rise, giving you more dividends for your money.

Equal Weighting Mutual Funds

On the other hand, mutual funds are often managed through market capping, which gives them a value through their demand on the market. This is how mutual funds can be divided into three 'caps': large, medium and small. If you float a large cap on the equal weight market, you will be likely to lose funds, as there will be more competition from smaller stores. Floating a smaller cap on the market could bring you quicker dividends, although you might also suffer large losses.