Invesco S&P 500 Equal Weight Index ETF
- Morningstar Medalist Rating: Neutral
- Morningstar Rating: ★★★
- Morningstar Category: US Equity
- MER: 0.26%
Invesco S&P 500 Equal Weight ETF CAD EQL suffers from high turnover and high volatility because it assigns the same weight to every S&P 500 stock.
The fund replicates the S&P 500 Equal Weight Index, which pulls in all S&P 500 stocks and weights them equally at each quarterly rebalance. An index committee has discretion over the S&P 500’s roster, and those decisions flow through to this index. Eligible stocks must meet minimum liquidity, size, and profitability standards. The committee-based approach can lack transparency, but it provides flexibility, which can reduce unnecessary changes during reconstitutions.
The equal weighting brings the portfolio’s average market cap lower than that of the Morningstar US Large-Mid Cap Index. This effect is amplified by the market’s heavy concentration in a few large companies. The portfolio also tends to hold lower-quality stocks, and it maintains a slight value tilt compared with the category index. This opens the fund’s performance to higher volatility, but it could also lead to outperformance when value surpasses growth.
Still, the equal weighting improves diversification. While the market-cap-weighted S&P 500 allocates over 20% to its top three names, 94 holdings collected the same 20% of the Equal Weight Index as of June 30. This portfolio’s top holdings are the stocks that perform the best between quarterly rebalances. Still, it’s unlikely for any holding to ever take up more than 1% of the portfolio.
Lower concentration comes with tradeoffs. Market cap weighting allows high performers to flourish, while equal weighting systematically reallocates from strong performers to weak performers at each rebalance. If a stock rallies over several rebalance periods (like Nvidia NVDA has), its position is routinely cut down, dampening the fund’s performance relative to the S&P 500, which enjoys the stock’s full benefit.
Because of the smaller tech allocation, the US exchange-traded fund share class underperformed the category index by 36 basis points annualized from its April 2003 inception through June 2025, with much of that underperformance coming in recent years. Its focus on smaller companies also led to slightly higher volatility and can lead to more severe drawdowns.
