The **S&P 500** is the benchmark of the U.S. stock market. But when you buy an S&P 500 ETF, you have a crucial choice to make: **market capitalization weighting (VOO)** or **equal weighting (RSP)**.
**VOO (Vanguard S&P 500 ETF)** is the standard, giving disproportionate power to the largest companies. **RSP (Invesco S&P 500 Equal Weight ETF)** gives equal importance to the smallest S&P 500 stock as it does to Apple. This difference changes everything about your portfolio's concentration, sector exposure, and long-term risk.
VOO: The Market Cap Standard
VOO is the passive investor's dream, tracking the index exactly as the market values it.
The Mechanism: If a company is 5% of the total S&P 500 market value, VOO holds 5% of its assets in that stock. This results in the top 10 stocks accounting for nearly 30% of the entire fund. This creates a significant **Concentration Risk**.
The Cost: Ultra-low expense ratio of **0.03%**.
RSP: The Diversification Play
RSP, tracking the S&P 500 Equal Weight Index, attempts to solve the problem of market concentration.
The Mechanism: Every stock in the S&P 500 is weighted at approximately 0.20% (1/500th). This means smaller companies are vastly overweighted compared to VOO, and the mega-caps are significantly underweighted. This shifts the focus from Tech to Industrials, Materials, and other sectors.
The Cost: Higher expense ratio of **0.20%**.
Comparison Matrix (RSP vs VOO)
Your choice reflects your belief in Mega Cap tech dominance.
| Feature | VOO (Vanguard) | RSP (Invesco) |
|---|---|---|
| Weighting | Market Cap (Concentrated) | Equal Weight (Diversified) |
| Exposure to Mid-Cap | Lower | Significantly Higher |
| Expense Ratio | 0.03% (Cheapest) | 0.20% (Higher) |
| Verdict | Standard Passive Investing | Macro/Value Investing Bet |
The Verdict: VOO is the Default Winner
If You are a Passive Investor → Choose VOO
The market cap weighted index (VOO) is the standard for a reason: it automatically allocates more capital to companies that are deemed more valuable by the market. Furthermore, its ultra-low fee of 0.03% will save you significant money compared to RSP's 0.20%.
If You Believe in Mid-Cap Value → Use RSP as a Satellite
RSP often performs better than VOO when economic cycles favor smaller, more cyclically sensitive companies. For investors who believe in mean reversion or want a dedicated mid-cap tilt, RSP can be used as a supplementary "satellite" holding, but should not replace the **VOO** core.
Conclusion: Stay Low-Cost
The higher cost of RSP makes it a strategic bet, not a passive foundation. For the vast majority of long-term investors, **VOO** remains the superior choice due to its lower fee and pure market-cap exposure.
