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

S&P Fund Tops the S&P 500

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

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 $69.07 0.00%
SPY $182.48 -1.50%
AAPL $94.27 0.00%
FB $101.00 0.00%
GOOG $684.12 0.00%


Chart of I:DJI
DOW 15,914.74 -99.64 -0.62%
S&P 500 1,851.86 -0.35 -0.02%
NASDAQ 4,283.5920 +14.8290 0.35%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs