Equal Weighting: A Trader’s Lament

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They promise simplicity, these exchange-traded funds. A basket of stocks, they say, for the small man. But look closer. Too often, it’s a basket woven with thicker strands at the top, the weight of a few giants dragging down the whole affair. A man can build his own basket, pick his own shares, if he has the time, the patience…and the stomach for the market’s whims. But they sell convenience, don’t they? A diluted promise.

The Invesco S&P 500 Equal Weight ETF (RSP 0.54%)—a name like a bureaucratic decree—aimed to correct this imbalance. To give every stock a voice, a share of the sun. A noble thought, perhaps, but the market doesn’t care for nobility. It cares for power, for momentum, for the relentless climb of the few. This fund, this RSP, sought to distribute the wealth, to spread the risk. We’ll see if it’s managed anything more than a redistribution of disappointment. This is the second of a series, a peeling back of the layers, a look at what happens when good intentions meet the cold reality of capital.

A Pattern of Lagging

The numbers tell a story, and it isn’t a particularly inspiring one. In the years of plenty—2023, 2024, 2025—the Invesco fund posted gains, yes. But gains that trailed the broader market by a considerable margin—twelve percentage points in ’23 and ’24, six more in ’25. It’s like running a race with a weighted vest. You finish, but you’re always behind. Then comes the bear market, 2022, and the Invesco fund loses money, but outperforms the S&P by a mere seven percentage points. A small victory in a sea of red, hardly a cause for celebration.

Look further back, and the picture muddies. 2021 saw the Invesco fund actually top the S&P 500. A fleeting moment of glory. Then came 2018, a weak year for the market, and the Invesco fund fell even further, losing eight percent while the S&P lost only four or five. It’s a capricious beast, this market, rewarding one year, punishing the next. A gambler’s paradise, a worker’s struggle.

Over a decade, fifteen years, the Invesco fund consistently lags. By nearly three percentage points annually over ten years, and a similar margin over fifteen. It doesn’t seem like much, they say. But compounding is a relentless force. Those lost points accumulate, turning into a chasm over time. A slow erosion of wealth, unnoticed until it’s too late.

The Weight of Diversification

The problem isn’t malice, it’s structure. The Invesco fund allocates only sixteen percent of its assets to technology stocks, compared to thirty-four percent for the market-cap-weighted ETF. The giants, the engines of growth, are underrepresented. Allocations to communication services are similarly skewed. They classify things oddly, these fund managers, shuffling stocks into categories that suit their narratives. It’s a game of accounting, not investment.

The Invesco fund overweights defensive sectors—consumer discretionary, healthcare, utilities—adding diversification, yes, but sacrificing potential gains. It’s like building a fortress instead of launching an offensive. Safe, perhaps, but ultimately stagnant.

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A Glimmer of Hope, or a Fool’s Errand?

It’s tempting to dismiss a fund that consistently underperforms. To write it off as a failed experiment. But the market is a fickle mistress. Conditions change. What doesn’t work today might work tomorrow. The final article in this series will explore whether the Invesco ETF has any chance of turning things around. Whether it can escape the weight of its own structure, or whether it’s destined to remain a footnote in the history of passive investing. A man can hope, but a trader knows better than to bet on hope alone.

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2026-03-18 19:02