Equal-weight — also called equal-weighted — exchange-traded funds (ETFs) are popular with investors because they offer enhanced diversification and a different, less common, approach to investing compared to market-cap-weighted ETFs.
Cap-Weighted ETFs
Most mutual funds and ETFs are capitalization-weighted, or cap-weighted. In cap-weighted ETFs, assets are allocated based on market capitalization, meaning larger companies receive larger allocations and, as a result, have greater influence on performance. It’s thought that cap-weighted ETFs better reflect the market, have lower internal turnover and provide better long-term performance by aligning with dominant companies.
The drawbacks to cap-weighted ETFs are that they can be heavily dependent on a few large- and mega-cap names, thereby reducing diversification.
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Equal-Weight ETFs
In equal-weight ETFs, each stock is given roughly the same weight and receives close to the same asset allocation. So, for example, in an ETF with 100 stock holdings, each stock would represent about 1% of the portfolio.
The Benefits of Equal-Weight ETFs
Equal weighting promotes diversification across a portfolio and reduces concentration risk in larger companies. It virtually guarantees that each company has a similar impact on performance, spreading risk and balancing reward.
By providing equal exposure to smaller companies, equal-weight ETFs can take advantage of the higher growth potential that may exist in undervalued, smaller companies. This is important when stocks are going up because the longer a bull market runs, the more likely it becomes that smaller companies will experience periods — sometimes extended periods — of outperformance.
Also, equal-weighted funds can provide access to broad market trends. They offer better exposure to a wider range of stocks, allowing shareholders to benefit from emerging trends that might be missed or overshadowed in cap-weighted products.
Additionally, the fact that equal-weight ETFs are periodically rebalanced to maintain their equal weighting can provide a unique benefit that comes from selling high and buying low. That’s because if a stock appreciates enough to throw the fund out of balance, it is sold off and the proceeds are allocated to stocks with lower performance. The rebalancing is a form of discipline and can take advantage of wide price fluctuations.
7 Equal-Weight ETFs With Strong Recent Performance
The market has seen its share of ups and downs so far in 2025. The major market indexes — most of them cap-weighted — have failed to deliver satisfactory returns, and investors are looking for alternatives. One thing they’re looking at is equal-weight ETFs.
The seven ETFs on this list are all beating the market year to date and appear to be trending higher. If you’re interested in securing the benefits of equal-weight investing, this timely list is a great place to begin:
| ETF | Assets | Expense Ratio |
| SPDR S&P Aerospace & Defense ETF (ticker: XAR) | $3.2 billion | 0.35% |
| First Trust NASDAQ Clean Edge Smart Grid Infrastructure Index Fund (GRID) | $2.3 billion | 0.56% |
| SPDR S&P Metals and Mining ETF (XME) | $1.8 billion | 0.35% |
| Invesco S&P Global Water Index ETF (CGW) | $957 million | 0.56% |
| SPDR NYSE Technology ETF (XNTK) | $1 billion | 0.35% |
| Defiance Quantum ETF (QTUM) | $1.3 billion | 0.40% |
| MicroSectors FANG+ ETN (FNGS) | $447 million | 0.58% |
SPDR S&P Aerospace & Defense ETF (XAR)
Geopolitical tensions in Europe, the Middle East and Asia are unsettlingly high. That unfortunate fact makes defense stocks a timely investment today. XAR is a $3.2 billion specialized index ETF that tracks the performance of the equally weighted S&P Aerospace & Defense Select Industry Index.
U.S. President Donald Trump has encouraged NATO countries to increase defense spending, and Europe has responded positively. The U.S. and virtually all NATO nations will be spending more on defense in the coming years. This bodes well for the stocks in the XAR portfolio.
Also, modern defense companies are, in a very real sense, technology companies. Today’s weapons systems, aircraft and military vehicles are computerized and are highly sophisticated; many utilize advanced artificial intelligence, or AI. In short, an investment in XAR is an indirect investment in parts of the AI industry and the tech sector.
XAR has a 30-day SEC yield of 0.3%. As of June 4, the fund is up more than 17% year to date. That performance compares very favorably to the S&P 500, which has only appreciated 1.5% for the year. XAR has an expense ratio of 0.35%.
First Trust NASDAQ Clean Edge Smart Grid Infrastructure Index Fund (GRID)
GRID follows the Nasdaq Clean Edge Smart Grid Infrastructure Index. The fund has just over $2.3 billion in net assets.
The ongoing boom in data center development and construction has put electric utility stocks in the spotlight. GRID tracks the performance of stocks in the electric energy infrastructure sector. That accounts for the fund’s 10.9% year-to-date performance as of June 4.
The fund invests in companies that are involved in digital electric meters and usage monitoring devices, electric networks, energy storage, smart grid software and electric grid infrastructure.
The fund is rebalanced and reconstituted semi-annually. This will increase internal trading but will have the effect of taking profits from winning stocks and allocating capital to stocks with more room to grow. GRID has an expense ratio of 0.56% and a 30-day SEC yield of 1%.
SPDR S&P Metals and Mining ETF (XME)
The $1.8 billion index ETF XME tracks the S&P Metals & Mining Select Industry Index. The fund has a reasonable expense ratio of 0.35% and a 30-day SEC yield of 0.5%.
XME provides investors with tactical exposure to the metals and mining segment of the S&P Total Market Index. Specifically, the fund provides access to companies focusing on aluminum, coal and consumable fuels, copper, diversified metals and mining, gold, silver and other precious metals, as well as some minerals and steel.
The fund’s equal-weight methodology allows for unconcentrated industry exposure to large-, small- and mid-cap stocks. Gold and industrial metals have been a bright spot in an otherwise uninspiring market. That’s led to an impressive year-to-date return of 13.1% for XME through June 4.
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Invesco S&P Global Water Index ETF (CGW)
CGW is a $957 million index ETF that tracks the S&P Global Water Index. The fund focuses on water utilities and companies involved in water-related businesses such as waste water treatment. CGW closed at $60.95 on June 4, giving the fund a year-to-date return of 12.5%.
CGW is the right fund for investors who want to take advantage of the increasing global demand for water infrastructure that’s being driven by population growth, freshwater scarcity and climate change. The fund invests globally but is geographically concentrated in the U.S. and the UK.
Water is, of course, a critical natural resource. This fund provides investors with exposure to a basket of about 75 leading stocks in the water industry on an equally weighted basis. CGW has a 30-day SEC yield of 1%, and its expense ratio is 0.56%.
SPDR NYSE Technology ETF (XNTK)
Any sound stock portfolio today must have exposure to the technology sector. Investors who want to take an equal-weight approach to tech investing should consider XNTK. This $1 billion ETF tracks the performance of the NYSE Technology Index, which is made up of about 35 stocks from the Information Technology sector and tech-related stocks in the Consumer Discretionary sector.
As of June 4, XNTK had appreciated more than 9% year to date. Considering that the tech-centric Nasdaq composite was up less than 1% for the same period, the fund’s performance is exceptional.
All eligible stocks are ranked based on market capitalization and liquidity, and the top 35 get included in the fund. The portfolio, however, is equally weighted and rebalanced annually to maintain that weighting.
The fund has a 30-day SEC yield of 0.3% and an expense ratio of 0.35%.
Defiance Quantum ETF (QTUM)
QTUM is an equal-weight ETF with net assets of just over $1.3 billion. This innovative fund is designed to provide shareholders with targeted exposure to companies specializing in quantum computing, AI and machine learning technology.
QTUM is an index fund that tracks a little-known benchmark called the BlueStar Quantum Computing and Machine Learning Index, which includes global stocks that derive at least 50% of revenue from those emerging technologies.
Technology is a volatile sector, and QTUM is a fairly aggressive fund. Still, this ETF is appropriate for investors who understand the risks and are interested in capitalizing on these fast-growing, transformative technologies on a diversified equal-weight basis.
The fund has appreciated around 8% year to date as of June 4. It has an expense ratio of 0.40% and a 30-day SEC yield of 1%.
MicroSectors FANG+ ETN (FNGS)
FNGS is a relatively small fund with net assets of about $447 million. The fund is organized as an exchange-traded note, or ETN, rather than an ETF. ETNs are unique debt securities that are backed by financial institutions that promise to pay the performance of a particular index. In the case of FNGS, the financial institution is the Bank of Montreal, and the index is the NYSE FANG+ Index. After the fund’s expense ratio of 0.58% is subtracted, there should be no tracking error between the fund and its benchmark.
FNGS is a highly concentrated security. There are only 10 stocks in its underlying index. They are: ServiceNow Inc. (NOW), Broadcom Inc. (AVGO), Netflix Inc. (NFLX), CrowdStrike Holdings Inc. (CRWD), Microsoft Corp. (MSFT), Meta Platforms Inc. (META), Nvidia Corp. (NVDA), Amazon Inc. (AMZN), Apple Inc. (AAPL) and Alphabet Inc. (GOOGL). Each stock represents about 10% of the index.
FNGS is up 6.5% for 2025 through June 4. The fund is suitable for aggressive investors who are bullish on the Magnificent Seven stocks — excluding Tesla Inc. (TSLA) — and three other high-growth, high-tech stocks.
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7 Top-Performing Equal-Weight ETFs to Buy Now originally appeared on usnews.com
Update 06/05/25: This story was published at an earlier date and has been updated with new information.
