Simply put, MSCI equal weighted indexes avoid concentrating too much of the portfolio into a few large stocks.

For over 30 years, leading asset owners, asset managers. The result: over the December 2000 to mid-2015 period, equal-weighted versions of MSCI flagship indexes, such as the MSCI USA Equal Weighted Index, delivered significantly higher returns than their cap weighted counterparts. A price-weighted index is a stock market index in which the constituent securities are weighed in proportion to their stock price per share. A leading global provider of benchmarks, analytics, and data solutions with multi-asset capabilities FTSE Russell’s expertise and products are used extensively by institutional and retail investors globally. The Equal Weighted calculation takes the value of the portfolio, the stocks you hold, the number of shares and creates an equally weighted portfolio with $100,000. [The formula does not make clear over what the summation is done.] S&P has also created equal weighted versions of the S&P MidCap 400 and S&P SmallCap 600 indices. Dow Jones Industrial Average is a prominent example of a price-weighted index. In such an index, companies with higher stock price have greater influence on the overall movement of the index. The little companies have just as much weight as the big guys. In this case, HDFC Bank will be equally weighted at 2 per cent and such a change will also bring down exposure to financial services sector to 20 per cent. The Capitalization-Weighted Index (cap-weighted index, CWI) is a type of stock market index in which each component of the index is weighted relative to its total market capitalization. For example, say you have these two stocks starting at these prices: A … Equal Weighted Portfolio Performance & Total Equal Weighted Value. An equally weighted portfolio of two assets means the invested capital is shared equally for the two assets.

The formula for this type of index is very simple (composite = close) and it doesn't need any historical database of fundamental data. The little companies have just as much weight as the big guys. Price-Weighted Index refers to the stock index where the member companies are allocated the on the basis or in the proportion of the price per share of the respective member company prevailing at the particular point of time and helps in keeping the track of the overall health of economy along with its current condition. An equal-weighted index fund, on the other hand, takes the same set of companies, and invests in them as equally as it can.
The red line is Invesco Equally Weighted S&P 500 Fund Class A (VADAX). The concept of an equal weight index was introduced in 2003 in the US with the S&P 500 Equal Weight Index. The total return of an equally-weighted portfolio is the average return of all constituents at each period. For an EQUAL WEIGHT Index each stock is equally represented in the Index. . So behemoth Apple ( AAPL ) and smaller Stericycle ( SRCL ) are owned in the same proportion under an equal-weight index.

In a price-weighted index, stocks with higher prices receive a greater weight in the index, regardless of the issuing company's actual size or the number of shares outstanding. A 1% change in the price of stock #1 has exactly the same effect on the Index as a 1% change in stock#2 or stock#3 etc.. In a capitalization-weighted index, companies with larger market capitalization exert a greater impact on the index value. An S&P 500 equally weighted index, for example, puts the same amount of money into Apple as it does into American Express.

... Superlative indices treat prices and quantities equally across periods.

Accordingly, if one of the higher-priced stocks (Company D, in our example) has a huge price increase, the index is more likely to increase even if the other stocks in the index decline in value at the same time. A 1% change in the price of stock #1 has exactly the same effect on the Index as a 1% change in stock#2 or stock#3 etc.

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