Passive funds that cap the top holdings?

[Deleted User]

Does anyone know of any passive/low cost funds that cap the top holdings?

I personally don't like holding so much in one company, Apple, Microsoft etc

Prism

newbinvestor wrote: »

Does anyone know of any passive/low cost funds that cap the top holdings?

I personally don't like holding so much in one company, Apple, Microsoft etc

What % do you want to cap them at. Also, why?

[Deleted User]

Prism wrote: »

What % do you want to cap them at. Also, why?

Maybe 1%.
I would prefer if lesser money was concentrated in a few companies incase those companies prices drops significantly

Prism

You could try an equal weighted tracker but the performance will likely not be as good.

ruperts

Not a cap as such but I believe you can buy equal weighted funds, maybe ETFs, where all constituents of the relevant index are given equal weight.

Edit. Prism beat me to it.

AnotherJoe

Though of course you'd get less when they rose. You'd never get the rise from Apple, Microsoft etc in the first place so one would cancel the other out so is it necessary to do this. ? Say Apple fell by 75% so it went to 1%. Well you'd be no worse off than if the fund held it at 1% in the first place.
Sounds to me you're after an active fund that doesn't let any one company get too large, but it won't be passive. I think there are passives that do things like hold equal weighting's of shares in an index but then you'd get nothing at all like the performance of the index.

Prism

I'm pretty much the opposite. Of my entire equity allocation my whole top 10 is above 2% each. I would rather each company be meaningful, either up or down.

Tom99

Prism wrote: »

You could try an equal weighted tracker but the performance will likely not be as good.

Is there a comparison available anywhere to show that?

Prism

Tom99 wrote: »

Is there a comparison available anywhere to show that?

Mainly because it will be trading more to keep holdings equal. A short term example of 5 years is the Xtrackers S&P 500 equal weight ETF which has underperformed its market cap equivalent by around 2% per year.

JohnWinder

Where do folk put their money when they all get out of Microsoft? Into other shares, which you'll own anyway as you invest in broad based index trackers. Or into bonds, which you hold for the same reason. Into cash long term... I don't think so. But that's idle speculation.

Here are four case studies comparing how equally weighted indices compare to their more typical market capitalization weighted cousins...... Now read on:
https://www.lynalden.com/equal-weighted-index-funds/

AnotherJoe

A very interesting read, thanks JW. I wonder if there are world trackers than do equal weighting run by the likes of HSBC and vanguard?,

Edit: I see vanguard are opposed to this on principle. So they don't do them.