what is an unweighted index 
an unweighted index is comprised of securities with equal weight within the index an equivalent dollar amount is invested in each of the index components for an unweighted stock index one stock s performance will not have a dramatic effect on the performance of the index as a whole this differs from weighted indexes where some stocks are given more percentage weight than others usually based on their market capitalizations understanding unweighted indexesunweighted indexes are rare as most indexes are based on market capitalizations whereby companies with larger market caps are accorded higher index weights than companies with lower market caps the most prominent of the unweighted stock indexes is the s p 500 equal weight index ewi which is the unweighted version of the widely used s p 500 index the s p 500 ewi includes the same constituents as the capitalization weighted s p 500 index but each of the 500 companies is allocated a fixed percentage weight of 0 2 1implications for index funds and etfspassive fund managers construct index funds or exchange traded funds etfs based on leading indexes such as the s p 500 index which is a weighted index 2 most choose to mimic their investment vehicles on market capitalization weighted indexes which means they must buy more of the stocks that are rising in value to match the index or sell more of the stocks that are declining in value this can create a circular situation of momentum where an increase in a stock s value leads to more buying of the stock which will add to the upward pressure on the price the reverse is also true on the downside an index fund or etf structured on an unweighted index on the other hand sticks to equal allocations among the components of an index in the case of the s p 500 equal weight index the fund manager would periodically rebalance investment amounts so that each is 0 2 of the total 1