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ERROR: type should be string, got "https://www.barrons.com/articles/apples-selloff-has-a-mixed-effect-on-etfs-1461990729\nApple’s Selloff Has a Mixed Effect on ETFs\nChris Dieterich\nSir Isaac Newton contemplated gravity after being struck by a falling apple. Apple shareholders are probably considering other things—like whether to sell the stock or buy more—after the tech giant suffered one of its worst weekly declines since first becoming the world’s largest company by market capitalization in 2011. Apple shares fell 11% last week, to $93.75, after the company posted disappointing iPhone sales.\nETFs by Category\nBad news for Apple (ticker: AAPL) is bad news for investors in exchange-traded funds, since indexes that adhere to market-cap-weighting schemes govern more than 90% of equity ETF assets, according to XTF. Steep declines in big companies tend to stir interest in unconventional index approaches, such as equal-weighted indexes. By design, ranking stocks equally will dampen the impact of high-profile flameouts. But equality dulls the impact of rising issues, too.\nApple’s heft is apparent in its 2.9% weighting in the SPDR S&P 500 ETF Trust (ticker: SPY), the largest and oldest ETF. The stock is in many popular ETFs. It has a more than 5% weighting in 37 funds, with a collective $143 billion in assets. Contrast this with the $9.4 billion Guggenheim S&P 500 Equal Weight ETF (RSP), which assigns only 0.2% weight to Apple. Proponents of equal weighting contend that the mechanism benefits investors by regularly paring back on winning stocks and adding those that have dropped in value. Guggenheim’s ETF reshuffles its holdings quarterly.\nApple shares fell 11% last week, to $93.75, after the company posted disappointing iPhone sales.\nLast week’s market action shines a light on the benefits of an equal-weighted ETF such as Guggenheim’s offering—and those benefits weren’t as great as investors might have thought. Apple’s drop, accelerated by the revelation that hedge-fund manager Carl Icahn had sold his position in the stock, didn’t do excessive damage to the S&P 500. Rather, Apple’s impact was largely offset by gains in other top holdings, namely Amazon.com (AMZN) and Facebook (FB), both of which surged following blowout earnings reports. By week’s end, despite the steepest drop in years for the world’s largest company, the equal-weighted S&P 500 ETF had outperformed the S&P 500 by a mere 0.3%.\nANY MOVE AWAY FROM MARKET-CAP WEIGHTING means exposing yourself, if inadvertently, to other potential risks. Notably, performance of equal-weighted strategies is heavily driven by smaller stocks. The Guggenheim equal-weighted ETF beat the SPDR S&P 500 ETF by nearly an average annualized percentage point in the past decade, says Morningstar. So did the iShares Core S&P Mid-Cap ETF (IJH), a market-cap-weighted basket of medium-size companies. In the past year, when bigger companies were in the lead, both equal-weighted ETFs and mid-caps trailed the S&P 500.\nMore From Barron’s\nBarron’s 2015 Best Online Broker Ranking\nProfiles of the World’s Best CEOs\nBest 100 Hedge Funds\nInvestors can make a case for equal weighting in specific sectors. For instance, an investor who anticipates a boom in mergers and acquisitions in biotechnology would get more pop from the First Trust NYSE Arca Biotechnology Index ETF (FBT), which is an equally weighted mix of midsize drug makers, than the iShares Nasdaq Biotechnology ETF (IBB), which bulks up on big stocks. The key is managing expectations. Equal weighting will win when smaller stocks are on top, but not all the time. Alex Bryan, an analyst at Morningstar, puts it this way: “The idea [of a market-cap index fund] is that you are harnessing the collective wisdom of the market. There is useful information in market prices.”\nE-mail: chris.dieterich@barrons.com\nSir Isaac Newton contemplated gravity after being struck by a falling apple."