SSPY outperforms S&P 500 in difficult quarter. Stratified diversification creates value by avoiding overweighting poorly performing growth segments (which are overweighed in the S&P 500) and relatively higher exposure to the strongly performing Energy and value stocks (which are underrepresented in the S&P 500).
Syntax Advisors Insights
In designing clinical trials, researchers use stratification to show that a new drug is effective across a particular group of people that are suffering from a disease or ailment.
The dominance of market-cap weighted indexing means that the carnage in technology isn’t done pummeling allocators.
What is the difference between Cap Weight, Equal Weight, and Stratified Weight? In the Cap Weighting methodology, the random distribution among the number of stocks in the sectors creates its own ever changing sector concentration problems.
An early believer in index investing, Rory Riggs also thought that there had to be a more efficient way to passively
capture market returns than either conventional cap or equal weighting and set out to uncover it.
An alternative way of looking at market-cap weighted index funds shows that investor exposure to the sector is higher than it was during the tech bubble.