2014 by far better for equal weighted instead of cap. weighted portfolios

Looking back at the past trading year we see huge differences in the returns of equal and capitalization weighted portfolios. The average of the global capitalization weighted indices over 2014 was around + 0,69 percent whereas the world equal weighted portfolio gained around 14 percent. This for both portfolios without dividend returns.

Returns world stocks equal weighted versus cap. weighted


When we look at the individual differences between the equal weighted (left) and the capital weighted indices (right) we see huge differences. For India and the Pacific the differences are extreme. When you invested in the MSCI India you gained 19,86 percent over the past year. But when you bought the Indian stocks and weighted them equally you gained 66,11 percent.

A few years ago we interviewed Robert Arnott from Research Affiliates about his view on capital weighted indices. According Arnott capital weighted indices are more or less systems of buying high and selling low.

Robert Arnott about the problems with capitalization weighted indices