One important consideration for investors thinking about buying exchange-traded funds, or ETFs, is the fund’s weighting methodology. Weighting is an important aspect of position sizing. It refers to certain characteristics of a stock and how much weight, or importance, that characteristic is given in determining how much of a stock to hold in a portfolio.
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Weighting can be based on many factors. A fund — or a fund’s benchmark — might, for example, be dividend-weighted, meaning more emphasis is put on stocks with higher dividends. Some funds and indexes are weighted based on public float. Others are weighted according to liquidity, trading volume or a number of other factors. The most popular and widely used weighting method is market-capitalization weighting, often called cap-weighting for short.
Cap-weighted funds and indexes place greater emphasis on larger companies as determined by market cap. In cap-weighted funds, larger companies get larger allocations and have more impact on overall total return. Bigger companies are seen as stronger and more financially sound. They get more attention from investors and Wall Street brokers, often leading to greater volume and higher stock prices. It makes some sense to use a cap-weight methodology, but there can be drawbacks.
Without position size caps or other safeguards, a strictly proportionate cap weight can give an unwanted influence to very large or mega-cap companies. This can have the effect of diminishing a fund’s diversification and causing undue concentration risk.
One excellent way for ETF investors to avoid such concentration risk is by investing in equally weighted funds. Equal weight funds invest roughly the same amount of money in every stock they own. When a stock holding appreciates to the extent that it throws the portfolio out of balance, the position is trimmed and the proceeds are redistributed to achieve an equal weighting. If, on the other hand, a stock depreciates, funds are allocated to that stock until equilibrium is reached once again. The process is called rebalancing.
In equal weight funds, smaller companies get the same exposure as larger ones. The result is a more balanced and diversified portfolio compared to cap-weighted finds where just a few companies can dominate performance.
If equal weight ETF investing makes sense to you, check out this list of seven of the best-performing equally weighted ETFs on the market:
| Exchange-traded fund | Forward Dividend Yield | Market Cap | Expense Ratio |
| ARK Israel Innovative Technology ETF (ticker: IZRL) | 0.4% | $104 million | 0.49% |
| Direxion Nasdaq-100 Equal Weighted Index Shares (QQQE) | 0.8% | $1.3 billion | 0.35% |
| SPDR S&P Telecom ETF (XTL) | 0.6% | $153 million | 0.35% |
| WisdomTree Cloud Computing Fund (WCLD) | 0.0% | $493 million | 0.45% |
| SPDR S&P Aerospace & Defense ETF (XAR) | 0.6% | $2.9 billion | 0.35% |
| WisdomTree Artificial Intelligence and Innovation Fund (WTAI) | 0.2% | $221 million | 0.45% |
| First Trust Dow 30 Equal Weight ETF (EDOW) | 1.6% | $236 million | 0.60% |
ARK Israel Innovative Technology ETF (IZRL)
The country of Israel is a geopolitical hot spot. It’s a nation that’s constantly embroiled in controversy and often engaged in armed conflict with its neighbors. It also happens to be a world leader in health care and technology innovation.
IZRL is a small, $104 million ETF passively managed by Cathie Wood: one of Wall Street’s most dynamic and successful portfolio managers. ARK mirrors the ARK Israeli Innovation Index, which tracks the performance of a basket of about 40 stocks with disruptive, market-moving biomedical and information technology. The index was custom-designed to be a benchmark for the fund.
The fund focuses on genomics, advanced health care technology, biotech, robotic manufacturing, information technology and the internet. The fund employs an equal weight methodology and has turned in excellent performance numbers so far in 2025. Year to date, IZRL is up about 11.2%. That compares quite favorably with the broad-market S&P 500, which has appreciated about 3.2% for the period, and the tech-heavy Nasdaq Composite Index, which is up about 1.7% for the year.
The fund has an expense ratio of 0.49% and a current dividend yield of about 0.4%.
Direxion Nasdaq-100 Equal Weighted Index Shares (QQQE)
Technology stocks can be volatile, but investors cannot afford to neglect them in our modern, information-driven economy. Invesco QQQ Trust (QQQ) is a mainstay of tech investing and one of the largest and most popular ETFs in the investing world. Most investors know that QQQ mirrors the tech-focused, cap-weighted Nasdaq 100 Index. QQQE is an equal weight version of that famous index sponsored and administered by Direxion Shares ETF Trust.
QQQE is perfectly suited for investors who appreciate the track record of QQQ but see the wisdom in owning an equal weight version of the fund going forward. The fund tracks the Nasdaq Equal Weighted Index. That benchmark contains the same stocks as its sister index, but it allocates assets equally instead of favoring bigger companies.
So far in 2025, QQQE has been a stellar performer. The fund has appreciated about 6% year to date. That’s almost double the roughly 3.3% year-to-date return QQQ has experienced.
The fund has $1.3 billion in assets, an expense ratio of 0.35% and a dividend yield of 0.8%.
SPDR S&P Telecom ETF (XTL)
XTL is an equal weight, index ETF with performance numbers that merit its inclusion on this list. Year to date, the fund is up about 3.5%, beating both the Nasdaq 100 and the S&P 500 fairly handily so far this year.
The objective of XTL is to match the performance of the S&P Telecom Select Industry Index after the fund’s expense ratio of 0.35% is subtracted. The $153 million fund provides investors with equally weighted exposure to the 39 stocks in the telecommunications segment of the S&P Total Market Index.
The portfolio includes alternative carriers, communication equipment companies, telecommunication services firms and wireless providers. The fund invests in large-, mid- and small-cap stocks.
XTL is suitable for equity investors looking to take a tactical, strategic position in the telecommunications industry.
Income is not a primary objective of the fund, but XTL does have a current dividend yield of 0.6%.
WisdomTree Cloud Computing Fund (WCLD)
The BVP Nasdaq Emerging Cloud Index is an equal weight index with the goal of providing balanced exposure to stocks in the cloud computing industry of the technology sector. WCLD is a $493 million index ETF designed to mirror that innovative benchmark.
The fund is perfect for investors seeking targeted exposure to domestic stocks and U.S.-listed ADRs focused on cloud computing and closely related industries. It’s not designed to be a core technology holding, but rather to be a complementary position to other growth-oriented and tech sector holdings.
WCLD invests in growth companies, meaning it invests in high-growth stocks with the potential for superior sales growth, profit margins and operating leverage. The year is still young, but the performance of WCLD has been exceptional. Year to date the fund has returned about 7.5%.
The expense ratio of WCLD is 0.45%. This ETF does not currently pay a regular dividend.
[READ: 7 Best Fidelity ETFs to Buy in 2025]
SPDR S&P Aerospace & Defense ETF (XAR)
Geopolitical tensions and military conflicts around the world have led to large increases in defense spending in countries around the globe. That could make XAR a very timely investment for investors looking to take a tactical position in aerospace and defense industry stocks.
XAR is a $2.6 billion ETF that closely tracks the S&P Aerospace & Defense Industry Index. That benchmark is an equal weight index composed of stocks in the aerospace and defense segment of the larger S&P Total Market Index. For example, Rocket Lab USA Inc. (RKLB), GE Aerospace (GE) and AeroVironment Inc. (AVAV) are the top three holdings in the fund. At about 5% each, those stocks represent roughly 15% of the fund’s net assets.
The fund’s recent performance has been outstanding. In the one-year period ending Feb. 11, the fund appreciated 43.2% and is already up more than 16.5% year to date in 2025.
XAR has a gross expense ratio of 0.35%. The fund has net assets of more than $2.9 billion.
WisdomTree Artificial Intelligence and Innovation Fund (WTAI)
WTAI is the second WisdomTree ETF to appear on this list and for the same reason: excellent recent performance. The fund is up about 29% over the six months ending Feb. 11 and has appreciated about 8% year to date in 2025.
This $221 million fund mirrors the WisdomTree Artificial Intelligence & Innovation Index, which is a custom, equal weight index comprised of companies involved and related to the emerging artificial intelligence, or AI, industry.
No investor can afford to neglect AI as an investment theme. WTAI provides balanced exposure to AI technologies and innovations by holding a diversified portfolio of AI stocks that exhibit high-growth characteristics.
Palantir Technologies Inc. (PLTR), Meta Platforms Inc. (META) and Broadcom Inc. (AVGO) are among the fund’s top holdings. The fund has an expense ratio of 0.45% and provides a small dividend yield of 0.19%.
First Trust Dow 30 Equal Weight ETF (EDOW)
The Dow Jones Industrial Average is one of the oldest and most highly regarded equity indexes in the investment industry. After a prolonged period of relative underperformance, this year the Dow is having its day. Year to date, the Dow has turned in about a 4.8% return, beating both the S&P 500 and the Nasdaq Composite Index.
Investors looking for a balanced approach to investing in the Dow should consider EDOW. EDOW is based on the Dow Jones Equal Weight Index, which, as its name implies, is an equal weight version of that world-famous benchmark.
Tax-sensitive investors should be aware that this fund rebalances quarterly. This can lead to a high level of internal trading and some unwelcome capital gains. Investors in the higher tax brackets may want to buy this fund in their IRAs or other tax-deferred accounts.
EDOW has net assets of about $236 million. The fund has an expense ratio of 0.5% and a current yield of 1.6%, the highest yield on this list.
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7 Top-Performing Equal Weight ETFs to Buy Now originally appeared on usnews.com
Update 02/12/25: This story was published at an earlier date and has been updated with new information.
