Market-cap weighting

Market-cap weighting — weighting each holding by the company’s total market value, so the fund automatically rides winners up and shrinks losers out with almost no trading. Collins calls the result “self-cleansing”: failing giants fade from the index while the next giants grow in, no committee required. The honest corollary: a cap-weighted world fund is substantially a US bet, because that’s where the market value is.

First used in: 1.5 · Why the index wins (principles)