Re:Margin Debt Surges 9.5% in June to Record High
by keernan on Friday August 22, 2025 @01:09PM
(#44987024)
The concentration isn't the 'fault' of indexing per se. There are two styles of indexes used by funds/etfs.
1. Most indexes are market capitalization weighted indexes... which can lead to the high concentrations we currently see.
2. There are also equal weighted indexes. These are less popular for a multitude of reasons, not the least of which is the expense associated with keeping the fund equal weighted (the fund has to periodically - eg quarterly - buy/sell stocks to bring everything back to 'equal'
I am currently in the process of moving a portion of my allocation into an equal weight sp500 fund precisely because I want to lower my exposure to the largest ten stocks in the sp500.
Another way to accomplish that would be to buy a market capitalization weighted index consisting of mid size or small cap stocks - thus avoiding the concentration of the top 10. But that changes the overall portfolio in other ways (small cap factor). I decided to use equal weighting a portion of my large cap holdings because I feel it is a more precise way to address the very specific problem I am addressing without adding other variables.
1. Most indexes are market capitalization weighted indexes... which can lead to the high concentrations we currently see.
2. There are also equal weighted indexes. These are less popular for a multitude of reasons, not the least of which is the expense associated with keeping the fund equal weighted (the fund has to periodically - eg quarterly - buy/sell stocks to bring everything back to 'equal'
I am currently in the process of moving a portion of my allocation into an equal weight sp500 fund precisely because I want to lower my exposure to the largest ten stocks in the sp500.
Another way to accomplish that would be to buy a market capitalization weighted index consisting of mid size or small cap stocks - thus avoiding the concentration of the top 10. But that changes the overall portfolio in other ways (small cap factor). I decided to use equal weighting a portion of my large cap holdings because I feel it is a more precise way to address the very specific problem I am addressing without adding other variables.