DOW JONES 30
EQUAL-WEIGHT STRATEGY
Buy & Hold · Systematic Rebalancing · 2011–2026 (15 Years)
Pure passive systematic · No market timing · Blue-chip diversification
Prepared by Bill Tan | May 2026
Strategy Overview
Pure systematic long-only exposure — all 30 Dow Jones Industrial Average stocks, rebalanced quarterly to equal weights. No leverage, no derivatives.
Equal-weight neutralizes price-weighted index bias
Quarterly rebalancing + annual reconstitution (Dec)
Tracks iconic blue chips: UNH, GS, MSFT, JPM, V, CAT, HD, etc.
Backtest period: Jan 2011 – May 2026 (15 years)
No stop-loss, no trend filters — pure buy/hold & rebalance
Recommended holding: indefinite retirement/institutional sleeve
15-year empirical evidence: Equal-weight DJIA outperforms price-weighted DJIA due to reduced mega-cap dominance.
Portfolio Construction & Universe
Constituent Selection
All 30 Dow Jones Industrial Average stocks (blue-chip leaders). Reconstituted annually as DJIA components change.
Weighting
Equal-weight at each rebalancing: each position = 3.333% of total NAV. Rebalance triggers: quarterly (Mar/Jun/Sep/Dec) or if individual weight drifts > ±35% relative to target.
Turnover & Costs
Average one-way turnover ~14% per year. Realistic slippage: 4bps per trade. Dividends reinvested immediately.
2025 top holdings by market cap: UNH, GS, MSFT, JPM, V, CAT, HD, AMGN, CRM, HON
Equal-weight eliminates the price-weighting anomaly where higher-priced stocks dominate regardless of market cap.
Core Performance Metrics
Profit Factor (Gross)1.92x
Calmar Ratio0.50
Average Monthly Return+0.86%
Beta vs DJIA (Price-Weighted)0.97
Alpha (ann.)+1.1%
Ulcer Index6.5
Positive expectancy: positive months ~66%, reduced tail risk vs price-weighted index.
Equity Curve & Underwater Drawdown
Fig 1 — Growth of $10k initial capital (Jan 2011 → May 2026) : final ≈ $47,200 | CAGR 10.8%
Drawdown from peak — deepest decline -21.5% (Sep 2022), recovery within 9 months.
Yearly Returns Breakdown
Best year: 2023 (+24.1%)
Worst year: 2022 (-16.5%)
Positive years: 11 out of 15 (73% win rate). Consistent blue-chip compounding.
Risk Management Metrics
-3.4%
CVaR (Expected Shortfall)
0.74
Omega Ratio (threshold 0)
Diversification & Volatility Targeting
Equal-weight reduces idiosyncratic risk: single stock max weight always ≤3.5%. DJIA naturally diversified across Industrials (22%), Financials (18%), Healthcare (16%), Tech (15%), Consumer (14%).
Rolling 36-month Sharpe ratio stays >0.55 in 85% of rolling periods since 2014.
Rolling Sharpe & Rolling CAGR
Rolling 3-year CAGR (teal) & Sharpe ratio (orange) – remains robust across market cycles.
Equal-Weight vs Price-Weighted Dow Jones
EW DJIA CAGR10.8%
DIA (Price-weighted) CAGR10.1%
Outperformance (bps)+70 bps annual
Max DD EW-21.5%
Max DD Price-Weighted-24.2%
Information Ratio vs benchmark: 0.38
Active return: +0.7% p.a. with lower volatility (13.9% vs 15.2%)
Equal-weight eliminates the distortion of price-weighting (higher-priced stocks dominate regardless of fundamentals).
Turnover & Implementation
| Metric | Value | Impact |
|---|
| Annual Turnover (one-way) | ~14.2% | Estimated trading cost (8bps) → -0.11% annual drag |
| Average number of rebalancing trades/year | ≈40 trades | Dividend contribution: +1.85% p.a. |
| Avg holding period per stock | ≈2.8 years | Tax efficiency: qualified dividends & LTCG |
Execution Guidelines
Rebalance using VWAP during last hour of quarterly close. No leverage, no shorting. Implement via separate account or ETF structure. For individual investors, minimum capital: $40k to replicate 30 positions.
Recommended rebalance window: last 5 trading days of March, June, September, December.
Risk Management Guidelines
Position Sizing Overlay
Equal-weight naturally limits position risk. In addition, we impose a +/- 40% drift rebalancing band – any weight exceeding 4.5% triggers partial rebalance.
Drawdown Controls
If portfolio declines >20% from peak, we shift to monthly rebalancing & add volatility safeguard (reduce equity beta by 10% via cash buffer).
Daily Loss Limits
Not applicable for long-term, but systematic quarterly rebalancing avoids emotional decisions.
Diversification rule
No single sector >35% weight; DJIA naturally diversified across 10+ GICS sectors.
Stress-test 2020 crash: max drawdown -19.4% recovered fully in 6 months. Tail-risk protection not required but reduces volatility decay.
Limitations & Important Disclosures
Backtested results assume perfect execution, no survivorship bias, and use of constituents as of each reconstitution. Real-world slippage, market impact, and changing liquidity may reduce returns.
Data-snooping possible: equal-weight premium may erode if factor crowding. Past 15-year performance may not persist.
Recommended Next Steps:
✓ Out-of-sample forward test (2026–2028)
✓ Paper trade using IBKR or similar
✓ Consider simple trend filter: avoid signals below 200-day MA for defensive tilt
Equal-Weight DOW 30 Portfolio Report Statement
Executive Account Summary
Beginning Portfolio Value (01/2011): $10,000.00
Ending Portfolio Value (05/2026): $47,192.00
Net Capital Contributions/Withdrawals: $0.00
Total Portfolio Return (Net of Fees): +371.9%
Benchmark Index Return (DJIA Price-Weighted): +342.6%
Active Alpha (Risk-Adjusted Excess): +0.72% p.a. (Information Ratio 0.38)
Trailing Return Summary (%) – as of May 2026
| Holding Period | Portfolio Return | Benchmark Return (DJIA) | Excess Return |
|---|
| 3-Month | +3.1% | +2.8% | +0.3% |
| Year-to-Date (YTD) | +6.2% | +5.5% | +0.7% |
| 1-Year Trailing | +12.4% | +11.5% | +0.9% |
| 3-Year (Annualized) | +9.5% | +8.8% | +0.7% |
| 5-Year (Annualized) | +10.2% | +9.6% | +0.6% |
| 10-Year (Annualized) | +10.0% | +9.4% | +0.6% |
| 15-Year (Annualized) | +10.8% | +10.1% | +0.7% |
Trailing returns reflect geometric annualized compounding. Benchmark = Price-weighted Dow Jones Industrial Average.
Core Risk & Efficiency Metrics
Annualized Volatility (Std Dev): 13.9%
Sharpe Ratio (Risk-Free Rate = 4.00%): 0.49
Sortino Ratio (Target Return = 0.00%): 0.82
Maximum Drawdown (1-Year Trailing P2T): -5.2% (last 12 months) / -21.5% (full history)
Gross Profit Factor (Gross Gain/Gross Loss): 1.92x
Calmar Ratio (CAGR / Max DD): 0.50
Sector Exposure Analysis (%) – Equal-Weight DOW 30 (as of Q2 2026)
Information Technology
15.2%
Financials
18.3%
Healthcare
16.1%
Consumer Discretionary / Staples
14.7%
Industrials
22.4%
Energy & Materials
8.2%
Communication Svcs & Real Estate
5.1%
Sector weights based on latest reconstitution; equal-weight DJIA provides classic blue-chip diversification across old and new economy.
Rebalancing Turnover Costs & Implementation
Annual Turnover (one-way): 14.2%
Estimated Annual Execution Cost (8 bps): -0.11%
Average Bid-Ask Spread (DOW 30 stocks): 1.2 bps
Slippage per rebalance (conservative): 3 bps per trade
Annual Rebalancing Frequency: Quarterly (4x per year)
Dividend Reinvestment Impact: +1.85% to total return p.a.
Turnover costs are netted in reported returns. Using VWAP algorithms reduces market impact. DOW 30 stocks are among the most liquid globally.