Masters in Business · Wednesday, September 2, 2026
Rob Arnott acknowledges equal weighting as a legitimate portfolio strategy that offers a rebalancing alpha and avoids market cap biases. However, he notes it has a strong small-cap and value tilt and can lead to portfolios with higher multiples if not carefully constructed, unlike fundamental weighting which is directly tied to economic footprint.
“It will have a stark small cap tilt because a tiny company will get the same weight as NVIDIA, as ExxonMobil. It will have a stark value bias. because companies that are trading at low multiples will get the same weight as stocks trading at high multiples.”
“The only Achilles heel that I think matters for equal weighting is equal weighting what stocks. Equal weighting the S & P, for instance. you're going to be equal weighting a portfolio that includes companies that have soared into being big enough to be added. You're going to be leaving out companies that have performed badly enough to be really cheap.”
“Interestingly, equal weighting over long periods of time, performs about the same as fundamental index, which we launched 20 years ago, but with much more variability.”