Two of the most widely held U.S. equity ETFs, RSP and IVV, offer distinct trade-offs: RSP emphasizes sector diversification, while IVV leads with lower expense ratios. For retail investors, the choice hinges on balancing portfolio breadth against cost efficiency.
- IVV has an expense ratio of 0.03%, significantly lower than RSP’s 0.15%
- RSP’s equal-weight structure reduces concentration risk across sectors
- Over five years, IVV has delivered a 10.7% CAGR compared to RSP’s 10.2%
- RSP outperformed IVV during 2020–2022 due to sector rotation
- A 0.12% fee difference can cost $1,350 over 20 years per $10,000 invested
- IVV benefits more from bull markets led by large-cap tech stocks
The decision between Invesco S&P 500 Equal Weight ETF (RSP) and Vanguard S&P 500 ETF (IVV) has become a focal point for individual investors seeking optimal exposure to the U.S. large-cap market. RSP, which rebalances holdings to maintain equal weight across all 500 S&P 500 components, reduces concentration risk compared to market-cap-weighted benchmarks. In contrast, IVV tracks the S&P 500 index with a traditional market-cap weighting and maintains the lowest expense ratio among major S&P 500 ETFs at 0.03%. RSP’s expense ratio stands at 0.15%, more than five times higher than IVV’s. The performance differential over the past five years underscores the long-term cost impact: IVV’s net asset value has grown at a compound annual growth rate of 10.7%, while RSP has returned 10.2% annually. The 50-basis-point cost gap, though seemingly small, compounds significantly over time—over 20 years, an investor in RSP could incur $1,350 more in fees than one in IVV for every $10,000 invested, assuming a 7% annual return. Despite its higher fees, RSP’s equal-weight structure has historically outperformed IVV during market corrections and periods of sector rotation. For example, from 2020 to 2022, RSP delivered a 2.1% annualized return compared to IVV’s 1.8%, driven by stronger gains in underweight sectors like financials and energy. However, in bull markets dominated by tech giants, IVV has consistently outperformed due to its heavy weighting in megacap firms like Apple, Microsoft, and NVIDIA. Investors with a long-term horizon and a preference for cost minimization may find IVV more appropriate. Those seeking broader sector exposure and reduced reliance on a few dominant stocks might favor RSP for its diversification benefits. The choice ultimately depends on risk tolerance, investment philosophy, and the balance between structural advantages and fee efficiency.