VOO vs. RSP: A Perfectly Reasonable Panic

by

The S&P 500. From 2023 to 2025, it was the only game in town, really. All those Magnificent Seven stocks, propping everything up like a particularly enthusiastic group of uncles at a wedding. It felt…safe. Predictable. Then, this year happened. Suddenly, everyone started asking if maybe, just maybe, spending all that money on artificial intelligence was a bit much. Like realizing you’ve accidentally ordered 700 garden gnomes. A perfectly reasonable panic set in.

Tech went from being the hero to…well, the guy who brought potato salad to the picnic and then ate half of it himself. It’s been lagging, and you know what that means? Diversification, apparently. A concept my Aunt Mildred has been lecturing me about since 1987. The traditional S&P 500 is underperforming, but the equal-weight version, the Invesco S&P 500 Equal Weight ETF (RSP +0.28%), is doing…fine. It’s gained almost 6% this year (as of March 3), while the Vanguard S&P 500 ETF (VOO +0.87%) is just…there. Flat. Like a lukewarm glass of water.

These two weighting schemes are fundamentally different. One’s a party where everyone’s crowding around the DJ, and the other’s a slightly awkward potluck. Right now, the potluck seems to be doing better. Though, obviously, that won’t always be the case. My investment strategy is rarely based on anything resembling long-term thinking.

The Case for the Traditional S&P 500

The biggest thing about VOO is its obsession with technology. Even after everything that’s happened, it still represents a whopping 33% of the index. That means a handful of companies are basically holding the whole thing hostage. It’s a risk, sure, but it’s also…exciting? It’s like betting on a particularly reckless horse. It could win big, or it could just run directly into a tree. It’s much more appropriate for a “risk-on” environment, which is what I tell myself whenever I make a questionable investment.

The S&P 500 is great when tech is leading the way. When it’s not, its flaws become glaringly obvious. It’s like discovering that your favorite sweater has a hole in the elbow. You can still wear it, but you have to strategically position your arm.

Loading widget...

The Case for the Equal-Weight S&P 500

RSP is a much more diversified version of the index. Industrials (17%), financials (14%), tech (13%), healthcare (12%). It’s…sensible. Almost offensively so. The largest individual holdings only account for around 0.3% of the portfolio. It’s like a well-balanced meal. Nutritious, but lacking a certain…je ne sais quoi.

This ETF outperforms when more areas of the market are participating in gains. Given that eight of the 11 S&P 500 sectors are beating the index this year, it’s having its best year relative to the traditional index in some time. It’s a quiet success. Like a librarian who secretly writes romance novels.

This is a great way to stay invested in U.S. large caps. But the sector mix gives it more of a defensive feel. It’s like wearing a helmet while riding a bicycle. Perfectly logical, but slightly unnerving.

S&P 500: Cap-Weight or Equal-Weight?

It really depends on how you feel about the tech sector. And honestly, my feelings about the tech sector are complicated. Over several years, tech is probably a good bet to outperform, with higher volatility along the way. Currently, however, tech is in a funk. And could remain so for a while as valuations draw concerns and the U.S. economy looks questionable. It’s like a promising student who suddenly decides to pursue a career as a mime.

Overall, I think VOO makes more sense as a long-term holding, given that it can better take advantage of its tech and growth overweights. In the short term, however, the diversification and relative risk mitigation of RSP probably makes more sense. Or maybe I’ll just buy more garden gnomes. It feels like a perfectly reasonable strategy, all things considered.

Read More

2026-03-10 14:32