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What you want is an equal risk weighted SPY ETF - where each component is weighted such that the contribution to total volatility is equalized. This can be done
by hendzen 9y ago
What you want is an equal risk weighted SPY ETF - where each component is weighted such that the contribution to total volatility is equalized. This can be done using some off the shelf risk models from firms like MSCI. There was such an ETF (ERW), but it never really took off, and it no longer trades. Unfortunately these methods will just remain available to only more sophisticated market participants.
- brndnmtthws 9y agoThere's still a lot of opportunity for new types of passive index funds, using methods like you suggest. Maybe someone will start an up.
- pedrocr 9y agoThat's stretching the definition of passive investing. What the OP describes is an active strategy like any other. That you can automate it and wrap it in an ETF doesn't make it passive.
- matt_wulfeck 9y agoMy hunch tells me specialized funds won’t beat cap weighted indexes from places such as Vanguard because of fees.