Equal-Weighted Index
An index in which every constituent carries the same weight regardless of company size.
Formula
Weight of each Constituent = 1 / Number of Constituents
Unit
%
In depth
Equal weighting removes the dominance of the largest companies and produces a measure closer to how the typical constituent performed, which is a different and sometimes more informative question than the capitalisation-weighted index answers. It carries an implicit tilt toward smaller companies within the index and requires frequent rebalancing, since weights drift the moment prices move. That rebalancing generates turnover and cost, which is why equal-weighted funds charge more than capitalisation-weighted ones. It is a different measurement, not a better one, and its relative performance varies by period.
Worked example
In a fifty-stock index, equal weighting gives each constituent 1 / 50 = 2%. Under free-float weighting the largest might carry 11% and the smallest 0.3% — a 37-fold difference in how much each matters.
Illustrative figures, chosen so the arithmetic is easy to follow. Not a live price and not a valuation of any company.
Educational reference only
This entry explains what “Equal-Weighted Index” means. It is not investment advice and not a recommendation to buy or sell any security. Any numbers above are illustrative, not live prices, and nothing here predicts price direction or rates a stock. Consider your own circumstances and consult a SEBI-registered investment adviser before acting.