Throw caution to the wind and leverage an even weight strategy

A Inflation and geopolitical tensions in Ukraine are causing market volatility that might scare off most investors, but for traders it presents an opportunity. Nevertheless, even traders with icy water in their veins may want to hedge their bets by not concentrating their positions too much.

One way to manage volatility is to reduce concentration risk by not putting all eggs in one basket, or, in the case of capital markets, one or a few stocks. This is where an equal weight strategy can come into play.

Essentially, a strategy like this spreads exposure evenly across various stocks so that the biggest household names aren’t the most targeted. Thus, investors using such a strategy can take advantage of upside potential across a range of stocks, regardless of market capitalization size.

“Equal weighting is a type of proportional measurement method that gives equal weight to every stock in a portfolio, index, or index fund,” Investopedia explains. “Thus, the shares of smaller companies have the same statistical importance, or weighting, as larger companies when it comes to evaluating the overall performance of the group.”

Get ahead of the S&P 500

Traders looking to use an equal weight strategy but also want to maximize the upside by doubling their exposure to the S&P 500 can use the Direxion Daily S&P 500 Equal Weight Bull 2x Shares (EVEN). The fund tracks the S&P 500 Equal Weight Index (SPXEWTR), which includes all components of the S&P 500® Index.

The index is an equally weighted version of the S&P 500® Index. Unlike the S&P 500® Index, which uses a free float-adjusted market capitalization-weighted methodology, the index assigns each constituent security the same weight when rebalancing.

When placed side by side with the Direxion Daily S&P 500 Bull 2X Shares (SPUU)EVEN is up 2.3% from SUPB’s 3.4% loss so far in 2022. EVEN just debuted at the start of the year, and so far it’s making its evidence in times of volatility.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.