Is This The Future of S&P 500 Investing?

In this video, we'll compare investing in a market cap weighted S&P 500 fund vs. a different method of investing in the same 500 companies. Check out My Recommendations (Purchasing anything here funds the free content on this channel): 📊 Personal Finance Bundle Wait List: https://bit.ly/4bpyTHT Work with an hourly fee financial planner here: https://bit.ly/48mrWaF 📝 Boldin - The retirement planning tool I use to make sure I'm on track with saving for retirement. It's perfect for "Do it yourself" investors https://bit.ly/3EAAhrJ 💬 Sign up for 1 on 1 coaching with me: https://bit.ly/4bAUpYT 📖 Free copy of my Spending Review Spreadsheet: https://bit.ly/48lMVZ1 A market cap weighted S&P 500 fund is a type of index fund that tracks the performance of the S&P 500, a stock market index made up of 500 large-cap stocks listed on the New York Stock Exchange or NASDAQ. In a market cap weighted index fund, the weight of each constituent stock is determined by its market capitalization, which is the total value of all outstanding shares of the stock. So, the larger the market cap of a company, the greater its impact on the performance of the fund. On the other hand, an equal weighted S&P 500 fund is a type of index fund that also tracks the performance of the S&P 500, but with a different weighting methodology. In an equal weighted index fund, all constituent stocks are given the same weight, regardless of their market cap. This means that smaller companies have the same impact on the performance of the fund as larger companies. There are a few key differences between market cap weighted and equal weighted S&P 500 index funds that investors should be aware of. One of the main differences is the level of risk involved. Market cap weighted index funds tend to be less risky than equal weighted index funds, because they are more diversified. This is because they give more weight to larger, well-established companies that are generally more stable and less prone to volatility. In contrast, equal weighted index funds give equal weight to all companies, including smaller, more volatile firms, which can increase the overall level of risk for the fund. Another difference is the level of return that investors can expect to receive. Because market cap weighted index funds give more weight to larger companies, which tend to have higher earnings and dividends, they may offer higher returns over time. Equal weighted index funds, on the other hand, may offer more moderate returns, since they give equal weight to both large and small companies. Finally, there is a difference in the way that these two types of index funds are rebalanced. Market cap weighted index funds do not need to be rebalanced as often, because the weights of the constituent stocks are continually adjusted based on changes in market cap. Equal weighted index funds, on the other hand, must be rebalanced periodically to ensure that all stocks continue to have equal weight. This can involve buying and selling stocks, which can result in transaction costs and potentially lower returns for investors. Affiliate Disclaimer: Some of the above may be affiliate links. Support the channel by signing up or purchasing through those links at no additional cost to you. I appreciate you for helping me keep this channel running. Disclaimer: This video is for entertainment purposes only. Everyone's situation is different so do your own research before making any decisions with your money. If you need help then contact a Certified Financial Fiduciary before trying anything that is mentioned in this video. I prefer a Fiduciary financial advisor that charges an hourly fee as opposed to an ongoing fee based on a % of your portfolio. Always remember that incentives determine the type of advice they give you so one that charges an hourly fee is less likely to be problematic.