Research > ETFs > ETF / ETP Commentary > 

Correct an Unbalanced Equities Portfolio With RSP

  • Related Symbols
  • RSP
Too much of a good thing can apply to equities exposure, and with exchange traded funds (ETFs) like the Invesco S&P 500® Equal Weight ETF (RSP B+), holdings get equal billing to help balance portfolios.As Invesco’s website puts it, RSP prevents investors from “putting your eggs in one basket.” It can be easy to fall into the trap of allocating too heavily into one or more stocks to extract maximum gains, such as big tech heavy-hitters like Apple or Amazon.While there’s nothing wrong with getting exposure to these companies, the problem could be compounded when markets head downward. In the midst of heavy sell-offs, investors could experience large drawdowns when they’re too heavily exposed to certain stocks.This is especially the case when it comes to the S&P 500. Extreme concentration risk could result when investors leave themselves vulnerable by investing too much in the index’s top holdings.“As the S&P 500 has grown ever more top-heavy, many investors in products tied to the Index have found themselves facing historic levels of concentration risk, the likes of which passive investors have not seen since 1970 — half a century ago. Such a high concentration in the S&P 500’s top five holdings potentially leaves investors vulnerable in the event that the companies’ current high valuations fall back to earth,” the Invesco website noted.Dividing Holdings EquallyRSP’s equal weight approach to the S&P 500 may offer investors a number of potential benefits. By reducing the heavy weightings allocated to the largest companies by divvying up holdings equally, RSP seeks to reduce the concentration risk.“Investors concerned about the growing concentration risk in traditional market cap-weighted indexes may want to consider an equal weight approach,” the website added. “An equal weight approach can provide diversification benefits and reduce concentration risk by weighting each constituent company equally, so that a small group of companies does not have an outsized impact on the index. Invesco S&P 500® Equal Weight ETF (RSP) takes an equal weight approach to the S&P 500, with each of its 500 constituent companies allocated approximately a 0.2% weighting in the portfolio.”Investors who are hesitant on whether this equal weight approach can truly extract gains from the S&P 500 only have to look at the past year’s performance. The ETF is up 40% within the last 12 months, proving that it can capture upside while still protecting from the downside by reducing concentration risk.For more news, information, and strategy, visit the Innovative ETFs Channel.

Performance data shown is past performance and is no guarantee of future results. Current performance may be higher or lower than the performance data quoted. Yield and return will vary, therefore you have a gain or loss when you sell your shares. For standard quarterly performance, go to the fund's Snapshot page by clicking on the ETF/ETP's symbol.

ETFs may trade at a premium or discount to their NAV and are subject to the market fluctuations of their underlying investments.

For iShares ETFs, Fidelity receives compensation from the ETF sponsor and/or its affiliates in connection with an exclusive long-term marketing program that includes promotion of iShares ETFs and inclusion of iShares funds in certain FBS platforms and investment programs. Please note, this security will not be marginable for 30 days from the settlement date, at which time it will automatically become eligible for margin collateral. Additional information about the sources, amounts, and terms of compensation can be found in the ETF's prospectus and related documents. Fidelity may add or waive commissions on ETFs without prior notice. BlackRock and iShares are registered trademarks of BlackRock, Inc. and its affiliates.

FBS receives compensation from the fund's advisor or its affiliates in connection with a marketing program that includes the promotion of this security and other ETFs to customers ("Marketing Program"). The Marketing Program creates incentives for FBS to encourage the purchase of certain ETFs. Additional information about the sources, amounts, and terms of compensation is in the ETF's prospectus and related documents. Please note that this security will not be marginable for 30 days from the settlement date, at which time it will automatically become eligible for margin collateral.

News, commentary (including "Related Symbols") and events are from third-party sources unaffiliated with Fidelity. Fidelity does not endorse or adopt their content. Fidelity makes no guarantees that information supplied is accurate, complete, or timely, and does not provide any warranties regarding results obtained from their use.

Any data, charts and other information provided on this page are intended to help self-directed investors evaluate exchange traded products (ETPs), including, but limited to exchange traded funds (ETFs) and exchange traded notes (ETNs). Criteria and inputs entered, including the choice to make ETP comparisons, are at the sole discretion of the user and are solely for the convenience of the user. Analyst opinions, ratings and reports are provided by third-parties unaffiliated with Fidelity. All information supplied or obtained from this page is for informational purposes only and should not be considered investment advice or guidance, an offer of or a solicitation of an offer to buy or sell a particular security, or a recommendation or endorsement by Fidelity of any security or investment strategy. Fidelity does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating ETPs. Fidelity makes no guarantees that information supplied is accurate, complete, or timely, and does not provide any warranties regarding results obtained from their use. Determine which securities are right for you based on your investment objectives, risk tolerance, financial situation and other individual factors and re-evaluate them on a periodic basis.

Before investing in any exchange traded product, you should consider its investment objective, risks, charges and expenses. Contact Fidelity for a prospectus, offering circular or, if available, a summary prospectus containing this information. Read it carefully.