looking at NVDA and its weightings in the SPY and the XLK (largest tech ETF)....

here are the weightings in each:

XLk SPY
AAPL. 21.8%. 7.1%
MSFT 22.7%. 6.7%
NVDA 5.0%. 3.0%
AVGO 4.34%. 0.95%

one can clearly see that the ratio of NVDA's weighting to those of AAPL, MSFT, AVGO differs completely between XLK and SPY... and I believe both of which purport to be market cap indices (not certain on XLK but I think so)...... this is a massive difference

I did learn recently that another big ETF, QQQ, is actually a capped-market cap weighted index.. I think AAPL is trimmed a little. not sure about MSFT.

and this is nitty (and not that important), but I see relative weights don't match up between AAPL and MSFT either. but it's pretty small difference (might just be how they deal with insiders shares)... I checked NVDA and it doesn't have significant insider shares.

thanks in advance

They are not exactly, as you discovered, cap weighted ETFs. They each have their own weighting and rebalancing rules which are somewhat complicated. They do each publish their rules so, if you are incredibly bored and feel like having a bit of a headache would be fun, you can look them up. The easiest way of finding those rules is to look up the underlying index for the particular fund you are interested in.

The rationale for the rules that I am aware of is that they can only have up to a certain percentage in any one stock and have up to a certain other percentage in a certain number of stocks to be considered a passive ETF. IIRC, no more than 25% in one stock and no more than 50% in the top 10 stocks, but I might be off a bit.

It's a massive difference because you're comparing massively different indexes that comprise the funds.

XLK is a select sector SPDR fund/ETF (there are 11 select sector indexes) by State Street, tracking the technology select sector.

SPY is a broad market SPDR S&P 500 fund/ETF by State Street tracking the 500 companies of the S&P.

You're comparing apples to oranges.

thank you... I hadn't seen this response.

I only understood this to be the case today.. and then happened to see reference to this thread in my search results.

I understand NVDA might go up to 20% or 25% and then AAPL will get kicked down to NVDA's 4.x% weight...... not sure the exact rules and/or timing. and NVDA hasn't passed AAPL yet, but based on trends, it'll probably happen this Tuesday (sarcasm)

thanks for the response but that's not true at all... I was comparing weighting ratios and they should be (in theory) exactly the same. obviously NVDA's weighting will be different within the technology sector vs. in the S&p 500

if they are both pure market cap indices then the ratio of NVDA weight to MSFT weight (or AAPL weight) will be exactly the same whether it's the technology index ETF or the S&P 500 index ETF.

there are other sources of differences (use slightly different price, maybe in slight error), different rules on insider stock (should be very minor too)......

There are 64 companies in the Technology Select Sector (source, page 2 of the XLK Fact Sheet on State Street's Select SPDRs website) (additional source, XLK annual report, also on State Street's Select SPDRs website go to holdings/schedule of investments, page 55)

Every dollar put into XLK gets put into the 64 stocks of the Technology Select Sector; nothing more, nothing less. XLK's performance is dependent upon the performance of the index it tracks: the Technology Select Sector index which you can read about here: https://www.spglobal.com/spdji/en/in...ndex/#overview.

Every dollar put into SPY gets put into the 500 stocks of the S&P 500 index; nothing more, nothing less. SPY's performance is dependent upon the performance of the index it tracks: the S&P 500 index.

Two entirely different indexes, that's the reason for the different weightings. And no, they won't be the same weightings when comparing those two entirely different indexes (S&P 500 index vs Technology Select Sector index)

You're confusing the hypothetical of two funds tracking the same index: two ETFs that both track the S&P 500 index, for example.

Don, with all due respect, you are wrong

i am talking weighting ratios not absolute weights

if AAPL has triple the market cap of NVDA (i made up ratio), AAPL will ALWAYS have triple the index weighting of NVDA no matter what else you put in with those stocks IN A MARKET CAP INDEX

just do an example... if AAPL and NVDA are 3 and 1 and only stocks in index, they are 75% and 25%

add in microsoft at 4, then they are 37.5% and 12.5%

add in 92 in other stocks (total = 100), they are 3% and 1%

if it's market cap with concentrations, then they may not be 3 to 1 any longer

in the real world, the spy ratio is nearing 1x, the XLK ratio is over 4x... that is insane. bad rules, part hindsight, part popoor design

Don, if you only read this... i made it very clear more than once that this is relativeweights between 2 stocks which should in theory be the same for 2 different MARKET CAP ETFs (there are possible reasons for slight differences IRL)

Please look at the first page of the XLK holdings on the fund's website: https://www.sectorspdrs.com/mainfund/xlk

Now you have to compare weightings. Compare the index holdings (the Technology Select Sector index) to the portfolio holdings of XLK (this is what XLK consists of)

For Microsoft, the index holdings are: 24.40% and the portfolio holdings inside XLK is 24.36%

That's a nearly exact mirror. Now do this for the other 63 holdings of XLK. The index holdings will be a nearly exact mirror to the portfolio holdings.

You can do this for the weightings in SPY with its 500 stocks (portfolio holdings) and compare it with the S&P 500 index holdings too. For Microsoft it's a bit over 7% in SPY, and the same bit over 7% in the S&P 500, the index it tracks.

If you're wondering why MSFT and AAPL and NVDA have a higher weighting in XLK compared to SPY, it's because they track different indexes and most definitely not because of "different rules on insider stocks" or "slightly different price"

Not for those 2 market cap ETFs (XLK and SPY). Both of those ETFs are market cap weighted, but both track different indexes and don't even have the same number of stocks (64 to 500)

i've tried reading this thread and prospecti but still have no idea what's going on here. if both indices being compared are cap weighted, the proportion of NVDA to AAPL/MSFT held across the funds should not materially differ, but it does (1:4 XLK, 1:2 SPY as of sep 23). can someone explain what is happening in plain english