"Moving from VOO to RSP cuts your technology exposure from roughly 33% down to about 14%. At the same time, sectors like industrials see a meaningful boost, rising from around 8.5% to roughly 15.5%."
"VOO follows a market cap-weighted index, which means companies that perform well grow into larger positions over time. Over the past decade, that has heavily favored mega-cap tech, making it the dominant driver of returns and risk in the S&P 500."
"RSP takes the opposite approach. It resets every holding to equal weight each rebalancing period, which can lead to different performance outcomes compared to market cap-weighted strategies."
Switching from a traditional market cap-weighted ETF like VOO to an equal-weight ETF like RSP can lead to substantial changes in sector exposure. For instance, technology exposure decreases from approximately 33% to 14%, while industrials increase from about 8.5% to 15.5%. This shift occurs because VOO's performance is driven by larger companies, particularly in tech, while RSP maintains equal weight across all holdings. Analyzing these changes is crucial for understanding potential impacts on portfolio performance over time.
Read at 24/7 Wall St.
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