Imagine it’s ten years ago and you are assessing the relative merits of market cap weighted exposure to US equities and an equally weighted allocation. Across a range of valuation metrics you can see that the equal weighted index is moderately cheaper. As luck would have it you also have a crystal ball that tells you that EPS growth will be greater for the equal weighted index over the next ten years. Same constituents, lower valuations and superior growth, that seems to be a great starting point for an equal weighted approach. So, what happened next?
More here – Behavioural Investing.
