Joe Terranova, chief market strategist at Virtus Investment Partners, said one of the big lessons to be learned from the 2022 market pullback is that investors need to build their portfolios differently. “I think there’s been a paradigm shift in 2022…and it’s moving toward an equal-weight strategy,” Terranova said on CNBC’s “Halftime Report” Tuesday. Such a strategy allocates an equal amount of money to each stock in the portfolio. This is significantly different from the S&P 500 and Nasdaq Composite, which are weighted based on market capitalization. Due to this structure, the equally weighted fund has relatively less exposure to the market’s largest stocks and more exposure to value stocks with lower price/earnings ratios. Equal-weighted funds generally outperformed last year. This strategy can also prevent the portfolio from being overexposed to hot sectors. Some tech stocks have ballooned to enormous size over the past decade, and when that trend reverses in 2022, equal-weighted funds are a relatively safe bet. $1 trillion to about $300 million after Tuesday’s drop in stocks. For investors with broad index funds weighted based on market capitalization, Tesla is a major performance drag. “I think it’s time for us to go back to the equal weighting strategy and put it at the top of the investment list,” he said. Terranova isn’t the only one who now believes in equal weighted trading. His ETF strategist at Bank of America, Jared Woodard, named the Invesco S&P 500 equally weighted ETF (RSP) as his top trade for 2023. His total 2022 return for the fund was -11.6%, meaning it fell significantly less than the S&P 500 equally weighted ETF. P500. Low exposure to technology and growth stocks was a key factor in its outperformance. Woodard said in his November memo to clients that the S&P 500 is underweight technology and telecom services by about 15%. After tech stocks underperformed again in December, value stocks now dominate the major indices. Equal-weighted funds, however, still offer investors more exposure to value stocks and areas such as energy and materials than broad index funds. Other Equal Weighted ETFs on the market include the Invesco Russell 1000 Equal Weight ETF (EQAL) and the iShares MSCI USA Equal Weighted ETF (EUSA).