What's the Best Way to Weight Your Portfolio? | The Informed Investor 34

Episode 34: If you believe your portfolio is too concentrated in big-name companies, why not buy the same amount of every stock in a broad-market index? That's the basic philosophy behind equal-weighted strategies. Instead of letting market capitalization determine weights in your portfolio, just keep the proportions of your holdings the same by buying and selling as often as needed. This approach means you'll prevent a handful of large cap companies from dominating your portfolio. But here's the thing. The name—equal-weighted—belies what's under the hood. Consider the constituents of the S&P 500, a widely followed index of large cap and mid cap companies across the growth/value spectrum. Since the index is weighted by market cap, stocks with large market caps impact performance much more than mid caps. In this structure, the Magnificent 7 (Alphabet, Amazon, Apple, Meta, Microsoft, NVIDIA, and Tesla) regularly move the needle on in the index's return, but mid caps don't because of their much smaller market cap. Recent data show that the top 10 stocks in the S&P 500 account for roughly 38% of its market cap, while the remaining 490 stocks account for 62%. Now imagine that every company regardless of its past performance or expected return accounts for just 2% of the index's market cap. This means a massive overweight for mid caps compared to their typical weights. Is that your goal? After underperforming the S&P 500 in recent years, the so-called S&P 500 Equal Weight Index more than doubled the return of its counterpart in January 2026. (S&P data © 2026 S&P Dow Jones Indices LLC, a division of S&P Global. All rights reserved.) Now, some investors are no doubt wondering whether this turn of events will continue—and whether they should adjust accordingly. In Episode 34 of The Informed Investor, Dimensional's Mark Gochnour, Head of Global Client Services, Wes Crill, PhD, Senior Client Solutions Director, and Jake DeKinder, Head of Client Communications, interrogate the trendy rationales behind equal-weighted strategies and discuss alternative ways to tilt portfolios to target higher returns. LINKS FROM TODAY'S EPISODE:  The Informed Investor: Feedback Survey https://www.dimensional.com/us-en/informed-investor-survey Above the Fray, Dimensional's Weekly Newsletter Subscribe: https://www.dimensional.com/us-en/subscribe-atf "The Informed Investor" on YouTube  www.youtube.com/playlist?list=PLCyJr6FFig-h1mA7rVP7Mbk0irFw2wA90  Dimensional Fund Advisors Shorts on YouTube https://www.youtube.com/@dimensionalfundadvisors/shorts Mark Gochnour on LinkedIn https://www.linkedin.com/in/mark-gochnour-9a23598a/ Wes Crill on LinkedIn https://www.linkedin.com/in/wes-crill-77a49417/ Jake DeKinder on LinkedIn https://www.linkedin.com/in/jake-d-4105b98/ Learn more at https://www.dimensional.com/