This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Index Funds That Can Beat the S&P 500

"The rebalancing is probably an important contributor to the strong performance of the equal-weighted index," says Srikant Dash, head of global research for S&P.

Unlike the equal-weight index, the better-known S&P 500 sells cheap stocks and buys expensive ones. This occurs because the famous S&P benchmark uses market-cap weighting, putting more assets in big stocks than in small ones. The largest stock in the S&P is Exxon Mobil (XOM - Get Report), with 3.91% of assets, while a small stock can account for 0.01%.

The danger of market-cap weighting became apparent in the late 1990s when large technology stocks skyrocketed. As prices of Cisco Systems (CSCO - Get Report) and Microsoft (MSFT - Get Report) soared, the S&P 500 had to shift its holdings, cutting unloved stocks and keeping more shares of the technology stars. When the big names collapsed, the index fell hard. The equal-weight index also dropped -- but not as far as the S&P 500 did. The unloved stocks proved relatively resilient in the downturn and cushioned the equal-weight index.

To own the biggest blue chips in an equal-weight fund, consider (BRLIX), which has returned 3.01% during the past decade, outdoing the S&P 500 by a fraction of a point. Bridgeway uses a proprietary selection process that generally includes the 35 stocks with the largest market capitalizations. However, there are some instances when the biggest stocks aren't picked for the fund. Bridgeway avoids tobacco stocks. In addition, the portfolio managers maintain diversification. So if too many energy or technology names are among the top 35 stocks, the proprietary system picks some of the next biggest companies to assemble a diversified group.
2 of 4

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
RSP $78.49 -0.08%
CSCO $26.26 0.17%
MSFT $49.78 -0.32%
XOM $88.40 0.41%
IWC $68.51 0.02%


Chart of I:DJI
DOW 17,655.00 -5.71 -0.03%
S&P 500 2,044.00 -6.63 -0.32%
NASDAQ 4,695.8940 -21.20 -0.45%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs