A Most Peculiar Pair: VOO and RSP

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Now, one finds oneself perpetually confronted with choices in this modern financial jungle, doesn’t one? And a particularly puzzling pair has recently come to my attention: the Vanguard S&P 500 ETF (VOO 0.08%) and its somewhat contrarian cousin, the Invesco S&P 500 Equal Weight ETF (RSP 0.26%). Both, you see, are attempting to capture the essence of the S&P 500, but employing methods as different as a bowler hat and a boater. It’s a dashedly curious situation, and one deserves a thorough unraveling, don’t you think?

The traditional approach, as embodied by VOO, is rather like inviting the largest chaps to the party and giving them the lion’s share of the buffet. It’s perfectly sensible, in a way, as those firms are, generally speaking, rather successful. RSP, on the other hand, operates under the principle that every firm deserves a fair crack of the whip, regardless of size. It’s a bit like giving every guest an equal slice of cake – a charming notion, though perhaps a trifle unconventional. The question, naturally, is how these differing philosophies translate into actual performance, and that, my dear reader, is where things get rather interesting.

A Snapshot of the Situation

Metric VOO RSP
Issuer Vanguard Invesco
Expense ratio 0.03% 0.20%
1-yr return (as of 2026-01-09) 16.88% 11.10%
Dividend yield 1.13% 1.64%
Beta (5Y monthly) 1.00 1.00
AUM $839 billion $76 billion

Now, one observes that RSP carries a slightly heftier annual cost, which is a bit of a bother, naturally. However, it does offer a marginally superior dividend yield, which may appeal to those seeking a bit of extra income. It’s a trade-off, you see, and a perfectly respectable one at that. The sheer scale of VOO, however, is rather astonishing. One can scarcely imagine managing such a vast sum without a considerable headache.

Performance and a Touch of Risk

Metric VOO RSP
Max drawdown (5 y) -24.53% -21.39%
Growth of $1,000 over 5 years $1,842 $1,517

As one might expect, VOO has demonstrated a rather superior five-year growth trajectory. However, it has also experienced a somewhat more dramatic downturn during periods of market turbulence. RSP, on the other hand, has proven to be a touch more resilient, though its overall returns have been somewhat more modest. It’s a question of temperament, you see. Those with a penchant for excitement may favor VOO, while those seeking a more placid existence may find RSP more to their liking.

The Inner Workings

RSP, in its commendable effort to level the playing field, significantly reduces exposure to those rather dominant mega-cap technology firms. Its sector allocation is considerably more balanced, with technology accounting for a mere 16% of the fund, compared to VOO’s rather substantial 35%. Each holding represents a relatively small portion of the overall portfolio, limiting the risk associated with any single company. VOO, on the other hand, is heavily weighted towards the usual suspects – Nvidia, Apple, and Microsoft – each accounting for a considerable slice of the pie. It’s a bold strategy, to be sure, but one that carries a certain degree of concentration risk.

For those seeking further enlightenment on the subject of ETFs, a rather comprehensive guide can be found at this link.

What Does It All Mean?

Both RSP and VOO offer access to the broad market, but they do so with markedly different approaches. VOO, with its emphasis on larger companies, tends to deliver higher returns when the market is booming. RSP, with its more balanced allocation, provides a degree of downside protection during periods of market stress. It’s a classic trade-off, you see, and one that requires careful consideration. Those seeking a more stable investment may prefer RSP’s equal-weighted approach, while those willing to take on a bit more risk for the chance of higher returns may opt for VOO. It all depends on one’s particular circumstances and appetite for adventure.

A Spot of Glossary, If You Please

ETF (Exchange-traded fund): A fund that trades on stock exchanges, holding a basket of underlying securities.
Expense ratio: The annual fee a fund charges investors, expressed as a percentage of assets invested.
Dividend yield: Annual dividends paid by a fund or stock divided by its current share price.
Market-cap-weighted index: Index where each company’s weight is based on its total market value, favoring larger companies.
Equal weight: Index or fund approach giving each constituent the same portfolio weight, regardless of company size.
Beta: A measure of an investment’s volatility compared with the overall market, typically the S&P 500.
AUM (Assets under management): The total market value of all assets a fund or manager oversees.
Max drawdown: The largest peak-to-trough decline in value over a specific period, showing worst-case loss.
Total return: Investment performance including price changes plus all dividends and distributions, assuming they are reinvested.
Sector allocation: How a fund’s assets are distributed across different industries, such as technology or financials.
Concentration risk: Risk that performance is overly dependent on a small number of holdings or sectors.
Single-stock risk: Risk that poor performance of one company significantly impacts a portfolio’s overall return.

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2026-01-18 03:23