VUG vs. RSP: How Tech-Heavy Growth Compares to Balanced S&P 500 Diversification

The Vanguard Growth ETF (NYSEMKT:VUG) tracks the performance of large-cap U.S. growth stocks, dominated by technology. By contrast, the Invesco S&P 500 Equal Weight ETF (NYSEMKT:RSP) equally weights all S&P 500 companies, leading to broader sector balance.

This comparison highlights how each fund’s approach affects returns, risk, and income potential, helping investors decide which one is best for their portfolio.

Snapshot (cost & size)

Beta measures price volatility relative to the S&P 500. The 1-yr return represents total return over the trailing 12 months.

VUG charges a much lower expense ratio, appealing to investors looking to minimize fees. However, RSP has a clear advantage in terms of income, with its substantially higher dividend yield.

Performance & risk comparison

What's inside

RSP holds 504 stocks, allocating roughly equal weight to each S&P 500 stock. It tilts toward technology (making up 16% of total assets), industrials (15%), and financial services (14%), with all of its top holdings making up less than 0.25% of its portfolio. The fund has a nearly 23-year track record, offering diversified exposure without favoring mega-cap stocks.

By contrast, VUG holds just 160 stocks and packs 51% of its portfolio into technology, 15% into communication services, and 14% into consumer cyclical. Its top three positions -- Apple, Nvidia, and Microsoft -- together make up more than 32% of assets, making it far more concentrated in a few large companies.

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What this means for investors

VUG and RSP offer distinct approaches that appeal to different types of investors, depending on their goals.

RSP is far more diversified, with over three times as many holdings and a less pronounced tilt toward any one industry. While tech is the most prominent sector in both funds, it makes up just 16% of RSP's portfolio compared to over 50% for VUG.

Also, RSP's top three holdings combined make up less than 1% of its overall portfolio, while VUG's top three holdings comprise nearly one-third of its total assets. VUG's heavy focus on a small number of tech stocks increases its risk substantially compared to RSP, but it also sets it up for more lucrative earnings.

Case in point: VUG has significantly outperformed RSP in both 12-month and five-year total returns. But with a higher beta and deeper max drawdown, it's also experienced more severe price swings in those periods.

In terms of fees and income, each fund has an advantage. RSP's expense ratio is five times higher than VUG's, which adds up for long-term investors. However, RSP also offers a significantly higher dividend yield, which can help recoup some of the money investors are paying in fees.

Where you choose to invest will depend on what you're looking to achieve with an ETF. VUG is more focused on tech-heavy growth with a history of higher returns, but it comes with a greater risk of volatility. RSP is more stable, but its earning potential may be more limited.

Glossary

ETF: Exchange-traded fund that holds a basket of assets and trades like a stock on exchanges.
Expense ratio: Annual fund operating costs expressed as a percentage of the fund’s average assets.
Dividend yield: Annual dividends paid by a fund divided by its current share price, expressed as a percentage.
Beta: Measure of a fund’s volatility compared with the overall market, typically the S&P 500.
AUM: Assets under management; the total market value of all assets a fund manages.
Max drawdown: Largest peak-to-trough decline in a fund’s value over a specified period.
Total return: Investment performance including price changes plus all dividends and distributions, assuming reinvestment.
Equal weight index: Index where each constituent receives the same weighting, regardless of company size.
Sector concentration: Degree to which a fund’s holdings are focused in a small number of industries or sectors.
Large-cap: Companies with relatively large market values, typically tens or hundreds of billions of dollars.
Growth stocks: Companies expected to grow earnings or revenues faster than the overall market, often reinvesting profits.
Drawdown: Decline from a portfolio’s or fund’s recent peak value to a subsequent low point.

Katie Brockman has positions in Vanguard Index Funds - Vanguard Growth ETF. The Motley Fool has positions in and recommends Apple, Microsoft, Nvidia, and Vanguard Index Funds - Vanguard Growth ETF. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.