Understanding RSP: The Equal Weight Approach to the S&P 500

When investors ask “what is an RSP?” they’re often looking to understand why this ETF behaves so differently from market-cap weighted alternatives like IVV. The Invesco S&P 500 Equal Weight ETF (NYSEMKT:RSP) represents a fundamentally different philosophy—rather than letting mega-cap companies dominate your portfolio, RSP gives each of the 500 S&P 500 component companies equal standing. This equal weight strategy rebalances regularly, meaning smaller companies get the same dollar allocation as giants like Microsoft or Apple. The distinction matters far more than most investors realize, creating meaningful divergence in returns, risk profiles, and sector exposure over time.

Cost and Income: Where RSP and IVV Diverge Most

The most obvious difference begins with expense ratios. The iShares Core S&P 500 ETF (NYSEMKT:IVV) charges just 0.03% annually—nearly negligible—while RSP costs 0.20%. For investors tracking long-term performance, this fee gap compounds, though in absolute terms RSP’s costs remain quite reasonable for active equal weighting management.

What RSP offers in return for that additional cost is a higher income component. As of early January 2026, RSP delivered a dividend yield of 1.6% compared to IVV’s 1.2%. This reflects RSP’s heavier allocation to dividend-paying sectors like Financials and Industrials, which receive outsized weight in an equal-weight portfolio. For income-focused investors, that extra 40 basis points of yield can offset the fee difference over extended holding periods. The funds also differ dramatically in size: IVV manages a massive $758.5 billion in assets, while RSP holds $77.2 billion—a twenty-fold difference that explains IVV’s superior cost efficiency.

Risk, Performance, and the Tech Question

Over the trailing five years through January 2026, IVV’s market-cap weighting produced stronger headline returns. IVV delivered 19.5% over the prior twelve months compared to RSP’s 14.1%. Over the full five-year window, $1,000 invested in IVV grew to $1,834, while the same amount in RSP reached $1,506. This performance gap reflects Technology sector dominance—IVV’s portfolio contains 43% in tech stocks, driven by giant positions in Nvidia, Apple, and Microsoft. RSP, by contrast, holds just 16% in Technology, with equal weighting pulling capital into Industrials, Financials, and other sectors that lagged the recent tech rally.

Yet performance doesn’t tell the complete volatility story. RSP’s equal weight methodology produced less dramatic drawdowns: over five years, IVV experienced a maximum peak-to-trough decline of -24.53%, while RSP’s worst decline measured -21.37%. This lower volatility reflects RSP’s built-in rebalancing discipline and lack of concentration risk. When mega-cap technology stocks eventually face headwinds, RSP’s broader exposure proves structurally more resilient.

Inside the Portfolios: Sector Weighting and Diversification

The equal weight index creates a portfolio fundamentally unlike the market-cap weighted S&P 500. IVV tracks the standard market-cap version, meaning each company’s weight reflects its total market value. The ten largest companies represent approximately 30% of the index, with Nvidia alone commanding outsized influence. RSP holds roughly 505 companies—essentially the full index—but allocates them uniformly. Top holdings including Sandisk Corp, Norwegian Cruise Line Holdings, and Micron Technology each represent less than 0.3% of the portfolio, illustrating the extreme diversification this approach enforces.

This structural difference matters enormously for sector timing. An investor in IVV during the 2020s tech surge benefited from concentrated upside. Yet an investor favoring equal weight positioning gains automatic rebalancing: when Technology stocks soar, RSP’s systematic reset sells high-performing tech and buys undervalued sectors, capturing mean-reversion benefits that market-cap weighting misses. RSP’s 22-year operating history proves this equal weight discipline works across multiple market cycles, though the strategy underperforms dramatically during tech-led bull markets and outperforms when leadership rotates.

What Different Investors Should Consider

The choice between IVV and RSP ultimately depends on your investment objectives and market outlook. IVV appeals to investors seeking maximum simplicity, lowest costs, and willingness to accept tech concentration in exchange for historically strong returns. This fund mirrors what “the market” actually weighs—an intuitive benchmark for passive investors unconcerned about sector tilts.

RSP suits investors uncomfortable with extreme Technology concentration and seeking alternative diversification. The equal weight methodology provides automatic rebalancing, higher dividend income, and demonstrated resilience to concentrated sector drawdowns. Yes, RSP underperformed during the recent tech boom, but this approach has historically excelled during periods when market leadership rotates away from megacap technology.

Both funds track the same underlying companies, yet the weighting formula determines vastly different portfolio characteristics. IVV’s 0.03% expense ratio and $758 billion in assets provide unmatched cost efficiency and liquidity. RSP’s 0.20% fee remains negligible while funding the complex rebalancing required to maintain equal weighting across 500 companies. The 40-basis-point yield advantage similarly rewards RSP shareholders with higher current income.

Consider your tax situation, risk tolerance, and predictions about technology sector leadership. Conservative investors or those uncomfortable with 43% technology exposure should examine RSP’s equal weight approach more seriously. Growth-oriented investors confident in continued megacap dominance should favor IVV’s simplicity and minimal cost. In practice, some investors hold both—using RSP as a counterbalance to IVV’s tech-heavy profile while maintaining core exposure to the broader market.