Stockchase Opinions

Terry Shaunessy Invesco S&P 500 Equal Weight Index ETF CAD EQL-T PAST TOP PICK Dec 09, 2020

(A Top Pick Jan 24/20, Up 8%) EQL de-emphasizes tech which is perfect for the expected rotation into non-tech sectors. Big US tech is getting fully priced.
$24.750

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BUY

An equal weight holding of RSP. It avoids the FX cost of moving back and forth money with USD. It has outperformed the S&P500 this year.

COMMENT
Caller was asking whether EQL could protect against downside in XSP. It depends what is drawing down the market. For example, if it is the Nasdaq and FAANGs, then EQL will protect you since it is underweight these big names. However, if the market is down, it will not help you.
BUY
Allan Tong’s Discover Picks EQL ETF charges a higher MER than the others here at 0.27%, though it pays a higher 1.87% dividend yield. A caveat is that EQL trades at low volumes averaging only 17,303. The weak presence of tech here means that EQL has outperformed its peers this year, declining only 11.9%. We circle back to whether an investor is bullish or bearish tech in the coming months. Read 5 ETFs for Index Investing for our full analysis.
BUY

Good option to hedge S&P 500. Equal weighted which makes it a safe bet. Would recommend for the long term investor. Going forward should perform well.

BUY
Trevor Rose’s Insights - Trevor’s most-liked answers from 5i Research

There have been studies conducted that show equal-weighted indices tend to outperform their market-weighted counterparts over the long term. Since the early 2000s, the equal-weighted S&P 500 index has outperformed the market-weighted S&P 500, and it is only over the last several years that market-weighted has demonstrated outperformance. Part of EQL's long-term outperformance can be attributed to the underlying investment actions of 'buy low, sell high', as it will continue to sell winners and add to underperformers. 

As a play on expectations for expanding breadth in the coming years (the remaining 493 companies to see outperformance), we feel this is reasonable, and we expect breadth to improve as we continue into a new bull market. 
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TOP PICK

Gives you broad diversification in the S&P and avoids depending on the Magnificent 7.

BUY
Trevor Rose’s Insights - Trevor’s most-liked answers from 5i Research

As an example, the equal-weighted S&P 500 outperformed the market-weighted S&P 500 from mid-2003 until roughly 2014. From 2014 until today, the market-weighted S&P 500 has outperformed its equal-weighted counterpart, and this typically is temporarily reversed in major market drawdowns (2009, 2020, and somewhat 2022). But, overall since mid-2003, the equal-weighted index has slightly outperformed the market-weighted index on a total return basis. 

Given the recent trend of the equal-weight index underperforming the market-weighted index, we would not seek to go against this trend just yet. Although, for an investor with a long-term timeframe and a willingness to see relative underperformance in the near-term, we think the equal-weighted index can outperform over the long term. We like the EQL ETF for a Canadian-denominated equal-weighted S&P 500 ETF.
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TOP PICK

MER of 0.26%. The market rally keeps expanding. A great way to participate.

PAST TOP PICK
(A Top Pick Feb 20/24, Up 18%)

A way to get away from the Mag 7 and any volatility associated with those names.