Diversifying does not historically protect investors from sell-offs, CFRA’s Stovall says

what do you guys think?

The S&P 500 ′s rally to all-time highs this year has many deliberating whether they should broaden out their exposure from the market cap-weighted benchmark in case of a pullback. However, CFRA’s Sam Stovall said allocating toward an equal-weighted index historically does little to protect investors.

“If history is any guide, for it is never gospel, investors need to be reminded that the equal-weighted versions of cap-weighted benchmarks have typically endured deeper selloffs and reduced frequencies of outperformance of their cap-weighted cousins during declines of 10% or more for the S&P 500 (since 1990), Nasdaq-100 (2007), Russell 2000 (2000), and S&P SmallCap 600 (2011),” Stovall wrote Wednesday.

“As a result, history showed that the collective approach to investing has frequently not lessened the magnitude of the eventual decline,” he added.