Equal Weights Allocation – How It Works in Fincanva

What It Is

Equal Weights is one of the simplest and most widely used allocation methods. It assigns the same proportion of capital to each asset (or model), regardless of its individual characteristics like risk, volatility, or return. This method aims to create a balanced exposure across all components of a portfolio or model.

What It Does in Fincanva

• Logic: Capital is divided evenly among all active components. In a portfolio, each model receives an equal share. In a model, each selected asset gets an equal weight.

• Simulation Behavior: Rebalancing maintains equal weights over time unless overridden by other settings like stop loss, max holding time, or reinvestment delay.

Pros

• Easy to understand and implement

• Naturally promotes diversification

• Doesn’t rely on historical data or volatility estimates

• Suitable for beginners and passive investors

Cons

• Ignores asset-specific characteristics like volatility or expected return

• May not optimize the portfolio’s risk-return tradeoff

• Requires periodic rebalancing to maintain equal distribution

• In models, can underperform more sophisticated strategies in volatile markets

Where You Can Use It

• Portfolios: Yes - Positive weights only

• Models: Yes

When to Use It

• Best for diversified and simple strategies

• Ideal when you don’t have a strong view on which assets or models will outperform

• Great starting point for educational or exploratory simulations

• Suitable for users who want low-maintenance, transparent allocation

Example
If your model includes 4 assets—A, B, C, and D—and your capital is $100,000, each asset will receive $25,000 (25%).
In a portfolio with 3 models, each model will receive 33.33% of the total capital allocated.

• Portfolios: Available on Starter, Advanced, Ultimate, and Professional plans

• Models: Available on Starter, Advanced, Ultimate, and Professional plans