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Advisors turn to equal-weight sector ETFs to manage equity concentration
A sector-level equal-weight approach like EQL weights sectors equally while keeping stocks within each sector market-cap weighted, and its top sectors include energy at 9.9% and healthcare at 9.7% as of Aug. 28, 2026.
ETF Trends reports that rising equity concentration is leading advisors to rethink portfolio construction, especially as they try to address concentration without unintentionally shifting risk into new factor exposures. The outlet says this balance is particularly difficult for clients holding positions with low cost bases, since major trades can create tax and operational hurdles.
On the Crossing the Themes podcast, Danny Schwab, senior investment strategy advisor at SS&C ALPS Advisors, and Paul Baiocchi, head of fund sales and strategy, discussed options for investors concerned about concentration risk. Baiocchi said some advisors consider switching from a market-cap-weighted S&P 500 approach to an equal-weight version, but noted that equal weighting can change the portfolio’s broader risk profile by increasing exposure to smaller companies and higher-beta stocks, along with higher volatility.
Instead of single-stock equal weighting, Schwab and Baiocchi pointed to a sector-level approach that adjusts sector allocations while keeping market-cap weighting among individual stocks within each sector. Schwab described EQL as an example of this structure, where sectors are equal weighted rather than stocks, and said advisors can use EQL alongside an S&P 500 ETF to modify sector exposure without overhauling a core allocation.
ETF Trends added that the takeaway for diversification is not only reducing the largest-stock weights, but also evaluating what new exposures a strategy introduces. In that context, the outlet highlighted EQL’s sector mix, including energy at 9.9%, healthcare at 9.7%, financials at 9.7%, information technology at 9.5%, and materials at 9.0% as of Aug. 28, 2026.
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