Correction to my earlier post. Equal-weighted indices don’t always outperform cap-weighted indices, as with the S&P 500. Australia’s ASX 100 Equal Weighted Index underperformed the cap-weighted ASX 100, recording annual growth of 3.79% (EWI) compared to 5.28% for the ASX 100 on a total return basis over the last 10 years.
Canada’s TSX 60 Equal Weighted Index, on the other hand, mimics the S&P 500. Equal Weight achieved an returns of 6.17% over the last 10 years compared to 5.33% for the cap-weighted index.
I will investigate further why Australia bucks the trend but I suspect the banks play a major role. The ASX 300 Banks Index substantially outperforms the broad ASX 300 Index.
