The Test Bench › index_rule
Does The 100 Biggest, Equal-Weight actually work?
DEADNo edge left once tested on a fair footing.
The claim
Hold the 100 largest companies, equal-weight — 'Own the blue chips' folk wisdom
What we did
Tested against Cap-weight SPY, buy & hold, 2017-2026, 100-stock equal-weight, annual rebalance, survivorship-free.
The result
Result: 8.9 %/yr CAGR (cap-weight = +12.5)
+8.9%/yr CAGR, Sharpe 0.56, maxDD -36% (2017-21 +13/yr, 2022-now +5/yr)
Verdict
Owning the giants equally LOSES to cap-weighting them (-4%/yr). The lesson: cap-weight's whole edge this decade was over-weighting the very biggest, not owning big names per se. 'Buy the leaders' equally is worse than the index.
What the test did and did not do
- survivorship-free universe
- point-in-time data
- checked for look-ahead
- net of real costs
- tested out of sample
Almost nobody publishing a backtest says which of these they did. We list the ones we failed as well as the ones we passed.
Tested 2026-06-23. The same treatment, applied to every other system, is on the test bench.
Written with AI assistance from our own test database. The numbers are computed, not composed.
General market commentary for education, not personalised investment advice. Backtested results are hypothetical. Trading carries a real risk of loss.