The equal-weight S&P 500 ETF just crossed $100 billion in assets. This means people are paying money to own the same stocks they already own but in dumber proportions. Revolutionary stuff.
Here's what equal-weighting does. Takes Apple at 7% of the index. Drops it down to 0.2%. Takes some dogsh*t pharmaceutical company nobody's heard of. Bumps it up to 0.2%. Charges you a fee for the privilege. The innovation is staggering. Someone call Sweden.
The flagship trade. That's what they're calling it. A flagship trade is apparently when you decide Microsoft shouldn't count for more than Dollar General just because Microsoft is worth two trillion dollars more. Makes perfect sense if you've suffered a recent head injury.
Investing experts say it's not a fad. Investing experts also said commodities were a super-cycle in 2008, housing never goes down in 2007, and that stock-picking was dead right before Nvidia went up 900%. But sure, this time they've nailed it. Equal-weighting is the future because treating ExxonMobil and Constellation Brands as equal partners in your retirement is definitely how compound interest works.
The money is flooding in this year. Flooding. That's the word they used. As if $100 billion appeared overnight instead of getting siphoned out of cap-weighted index funds that were already doing the exact same f*cking thing but with math that reflected reality. Retail traders saw the equal-weight index outperform for six months and decided they'd discovered alpha. They discovered a rebalancing trade in a rotational market. Breathtaking.
The real story is simpler. Magnificent Seven stocks took a breather. Small caps bounced. Equal-weight won by default. Now it's a flagship trade with expert validation and CNBC segments. Six months from now when the mega-caps resume melting faces, these same experts will explain why concentration risk is actually good and equal-weighting was always for people who hate money.
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