This Day On The Street
Continue to site right-arrow
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
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

S&P Fund Tops the S&P 500

Stocks in this article: RSP SPY MSFT CSCO CVX GE

During the past decade, the equal-weight benchmark has done particularly well in bull markets. At such times, investors have shown a greater appetite for riskier small stocks and less desire to take shelter in the biggest names. When stocks rebounded in 2009, Guggenheim returned 44.6%, compared to 26.4% for SPDR S&P 500.

While they may deliver greater returns, smaller stocks can be more volatile. That has sometimes resulted in poorer performance for the equal-weight fund. But most often, equal-weight portfolios have held their own in down months. During the 20 years ended in 2012, the equal-weight benchmark returned 10.2% annually, compared to 8.2% for the conventional S&P 500.

The equal-weight benchmark does trail during the times when mega caps lead the markets. That happened in the great technology bull market of the 1990s.

For the six consecutive years ended in 1999, the S&P 500 outdid the equal-weight index. Then beginning in 2000, the equal-weight index outperformed for six consecutive years.

The mega-cap periods of outperformance are relatively rare, says Craig Lazzara, senior director of S&P Dow Jones Indices. "It is typically the case that the largest stocks are not the market leaders," says Lazzara.

While the long-term odds may favor equal-weight funds, some analysts argue that the mega caps are due for a period of outperformance. Todd Rosenbluth, director of ETF research for S&P Capital IQ, argues that the Guggenheim fund can be a solid core holding. But he prefers SPDR S&P 500, because of its big stakes in the blue chips, including Chevron (CVX) General Electric (GE), and Microsoft. "The mega-cap stocks are attractively valued," he says.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

Stan Luxenberg is a freelance writer specializing in mutual funds and investing. He was executive editor of Individual Investor magazine.
2 of 2

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

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
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

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

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, 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
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,804.80 +26.65 0.15%
S&P 500 2,070.65 +9.42 0.46%
NASDAQ 4,765.38 +16.9840 0.36%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs