While geopolitics and international security are the headline threats to markets right now, concentration risk hasn’t gone away. AI may not be a bubble, but the huge role played by a handful of tech firms has given investors pause. Investors have options to address that, however, with equal weight ETFs. Equal weighting can limit concentration risk for investors and offer upside in case of further market volatility.
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Funds like the Goldman Sachs Equal Weight U.S. Large Cap Equity ETF (GSEW) provide a way to equal weight key indexes like the S&P 500. Charging 9 basis points (bps), the fund asks one of the lowest fees for equal weight offerings in the ETF wrapper. It equally weights key U.S. equities and rebalances monthly.
The strategy has taken that approach and performed well, outperforming the Large Cap Growth Equities ETFs ETF Database Category average recently. GSEW outperformed that space on a YTD and one month basis. It has also outperformed the category over the last five years, as well, making it a durable long term option.
Intriguingly, according to ETF Database data, the fund’s largest segment is finance, with some other tech subsections following up. So, should market volatility see tech offerings tumble, a fund like GSEW could prove a healthy differentiator. At the same time, should finance or health or another segment of stocks suddenly spike, GSEW can pick up on it.
The strategy is also showing signs of momentum amid the aforementioned market volatility. According to YCharts data, the fund’s price of $89.35 sat above both its 50 and 200-day Simple Moving Averages (SMAs). That traditionally indicates a buy opportunity for a given ETFs. For those looking to add an equal weight ETF amid rising AI concentration risk, GSEW may be one to watch.
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