Another equal-weight exchange-traded fund based on the S&P 500 is being proposed, this time using Select Sector SPDRs to carve up the index.

The ALPS Equal Sector Weight ETF would track a Merrill Lynch benchmark that divvies up the broad U.S. stock market by its nine major sectors, according to a recent filing still under review by the Securities and Exchange Commission. Each would be represented by a Select Sector SPDR fund. 

"At all times, the Merrill Lynch Equal Sector Weight index will be comprised of the constituents in the S&P 500, albeit in different weights," said the registration statement. 

The fund-of-funds ETF is expected to come with an annual expense ratio of 0.55%. 

The proposed ETF would compete against equal-weight sector portfolios both  from Rydex and ProShares. But one other, the Rydex S&P Equal Weight (NYSE: RSP), actually does much the same as the new ALPS fund would attempt to accomplish. Namely, it includes all sectors under one umbrella.

But there's a caveat. While RSP equal-weights each of the S&P 500's stocks, the new product is giving the same weights to each sector—on a cap-sized basis. 

That should make the new ETF correlate much closer to the actual S&P 500's performance. Also, RSP rebalances on a quarterly basis. 

"It's not a bad idea—we've been big fans of equal-weighting for years," said Anthony Welch, a portfolio manager at Sarasota Capital Strategies. 

He has been using separate Rydex equal-weight ETFs for each sector to come up with an overall mix to match the S&P 500. 

"We'll have to see what the internal costs are going to be for the new SSgA [State Street Global Advisors] equal-weight ETF and how much it rebalances," said Welch. "But with its closer correlation to the S&P 500, and RSP's greater emphasis on mid-cap stocks, it comes down to what you want to equal-weight.

He added: "It comes down to a choice of weighting your portfolio at the stock level or at the sector level."  

You can read the prospectus for the new ALPS/SSgA fund here.