Equal weight investing is nonsense

I love to BBQ. When I am smoking a large piece of meat like a brisket or a pork shoulder, we invite people around to share it with. I prepare the meat, my wife does most of the sides. Smoking cooking meat on the BBQ doesn’t involve that much work. You get up early, prepare your meat and get your temperatures right and then get on with the rest of your day, checking the temperatures and fuel levels to ensure they are right. My wife however, has tons of work to do in preparing sides and deserts (I don’t do any deserts!). Who gets the plaudits? I do. Because they came to eat smoked meat. The meat is the star of the show, not the sides.

Equal weight investing

There are indexes that give equal weight to all the stock held in the portfolio. Which is absolute nonsense. The biggest companies in the world are the star of the show and you should have more of them than the others. It is like having the same amount of salad leaves as brisket!

To prove my point, I created a portfolio of the top 10 companies in the S&P 500 and weighted them according to their weighting in the S&P 500.

1. Nvidia – 19.8%
2. Microsoft – 17.51%
3. Apple – 15.99%
4. Alphabet – 10.41%
5. Amazon – 10.15%
6. Meta – 7.36%
7. Broadcom – 6.35%
8. Berkshire Hathaway – 4.31%
9. Tesla – 4.31%
10. JPMorgan Chase – 3.81%

I then created a portfolio of the same 10 stocks with 10% holding in each. Having an equal amount in each company loses you money. And this is the top 10 companies; the best performing companies in the S&P 500. Imagine Nvidia having the same weighting as the bottom 13 companies which all have a 0.01% weighting in the normal index?

What does that mean in money terms? If you invested €10,000 in each of these portfolios ten years ago, you would have the following amounts today:

1. Weighted portfolio – €692,599
2. Equally weighted portfolio – €405,836

That’s a 70% difference over a ten year investment. In that ten years, the equally weighted portfolio did outperform its counterpart twice, in 2020 when tech stocks took a hammering and in 2018, which was a negative year in total caused by increased interest rates and the first of Trump’s tariffs (2025 wasn’t the first time!).

When you invest, you want exposure to the winners, the best performing stocks in the world. The index itself will look after the weighting. Meta dropped out of the top ten when they changed from Facebook and is now the sixth biggest holding. Don’t think you know what way the market is going by reducing your exposure to the biggest companies in the world and increasing your rating in much smaller ones.

Steven Barrett

06 October 2025