Jim Van Meerten

Mon, Jun 30, 2025, 7:15 AM2 min read

• Cap-weighted ETFs are not fully passive. They actively overweight rising stocks and underweight declining ones through constant rebalancing.

• Over the past 10 years, IVV (cap-weighted) significantly outperformed RSP (equal-weight) in both price appreciation and total return.

• IVV delivered a 249.28% 10-year total return versus RSP’s 164.91%.

• While these ETFs show strong performance, investors should maintain diversification and risk management aligned with their personal risk tolerance.

A topic that does not get enough coverage in my Chart of the Day is exchange-traded funds (ETFs). Some people think of ETFs as totally passive investing, so let’s take a closer look at that premise.

I would agree that if you are investing in an equal-weight ETF, you are making a passive investment decision. But what if you choose to invest in a cap-weighted ETF?

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Most active portfolio management algorithms aim for overweight positions in stocks that have rising prices and underweight positions in stocks with sinking prices. That’s exactly how a cap-weighted ETF works, by naturally “rebalancing” throughout each session as prices of each individual fund component rise and fall. And beyond that, most cap-weighted ETFs rebalance every quarter.

Let’s put that thinking to the test and look at a chart of the prices over a 10-year period for two funds:

• iShares Cap Weighted S&P 500 ETF (IVV)

• Invesco’s Equal Weighted S&P ETF (RSP)

You can see that over the 10-year period of this chart that IVV’s price rose 197.97% while the price of RSP only rose 126.68%.

But what if we also factored in the reinvestment of dividends for the total return?

iShares S&P 500 Cap Weighted ETF:

• 65.39% 3-year total return

• 120.73% 5-year total return

• 249.28% 10-year total return

Invesco S&P 500 Equal Weighted ETF:

• 37.89% 3-year total return

• 99.% 5-year total return

• 164.91% 10-year total return

Using these comparisons, I think you’ll agree that the iShares Cap Weighted S&P 500 ETF has a clear advantage over the totally passive, equal-weight ETF RSP.