Introduction: Why “Best S&P 500 Equal Weight ETFs” Matter in 2025
By equal weight S&P 500 ETF, I mean a fund where each of the stocks within the S&P 500 index is assigned the same weight. This prevents giant companies like Apple and Microsoft from dominating the index. In this world, Tesla is on equal footing with Tapestry. Wild, right?
Why should this matter? Because if you're like me, you want genuine diversification, not just a portfolio heavily skewed towards technology. This is where the best equal weight S&P 500 solutions shine. They help you avoid concentration risk and capitalize on underdog comebacks.
In 2025, these ETFs deserve a place in your portfolio, especially if you prioritize diversification and want to avoid overpaying for souped-up mega-cap stocks.
Key Insight
When smaller stocks recover or when the tech sector takes a break, equal-weight ETFs tend to perform better. This is not just about returns; it's about consistency, lower volatility, and achieving an optimal sector mix.
You’re not just investing in the S&P 500; you’re owning all 500 stocks more equitably, providing a level playing field for mid-cap and smaller players.
These ETFs typically rebalance quarterly, which imposes an automatic "buy low, sell high" discipline. Furthermore, expense ratios have fallen, with some options below 0.20%, making them affordable for long-term wealth accumulation.
The Rise of Equal Weight Investing
Investors, including myself, have been increasingly turning to equal-weight funds as a strategic hedge against their cap-weighted heavy portfolios. With new and innovative products available in 2025, the focus is no longer just on the classic RSP.
Cap-Weighted vs. Equal-Weighted: The Core Difference
The Best 10 Equal Weight S&P 500 ETFs to Buy in 2025
Here’s a snapshot of the leading equal-weight and equal-weight tilted ETFs on the market. Note that some are broad-market funds, while others focus on specific sectors with an equal-weight methodology.
| ETF Name | Ticker | 1 Year Return | 5 Year CAGR | Expense Ratio | AUM (USD) | Dividend Yield | Rebalancing | Issuer |
|---|---|---|---|---|---|---|---|---|
| Invesco S&P 500 Equal Weight ETF | RSP | 18.4% | 11.2% | 0.20% | $43.6B | 1.58% | Quarterly | Invesco |
| Direxion S&P 500 Equal Weight ETF | EQL | 17.9% | 10.8% | 0.27% | $390M | 1.42% | Quarterly | Direxion |
| First Trust S&P 500 Equal Weight AlphaDEX ETF | FTA | 19.2% | 12.1% | 0.65% | $2.4B | 1.63% | Quarterly | First Trust |
| Invesco ESG S&P 500 Equal Weight ETF | RSPE | 16.5% | - | 0.20% | $210M | 1.50% | Quarterly | Invesco |
| S&P 500 Equal Weight Technology ETF | RYT | 21.8% | 13.7% | 0.40% | $3.7B | 0.84% | Quarterly | Invesco |
| S&P 500 Equal Weight Healthcare ETF | RYH | 15.60% | 10.10% | 0.40% | $980M | 1.42% | Quarterly | Invesco |
| S&P 500 Equal Weight Consumer Staples ETF | RHS | 14.9% | 9.3% | 0.40% | $575M | 1.96% | Quarterly | Invesco |
| S&P 500 Equal Weight Financials ETF | RYF | 19.0% | 10.9% | 0.40% | $620M | 1.99% | Quarterly | Invesco |
| S&P 500 Equal Weight Industrials ETF | RGI | 18.7% | 11.4% | 0.40% | $460M | 1.77% | Quarterly | Invesco |
| Avantis U.S. Equity ETF (Equal-weight tilted) | AVUS | 20.2% | 12.8% | 0.15% | $7.8B | 1.35% | Dynamic | Avantis |
Notes on the ETFs:
- RSP: The industry standard and most liquid equal-weight ETF.
- RYT, RYF, RHS etc.: These are sector-focused but apply the equal-weight principle within their respective sectors.
- AVUS: Not a pure equal-weight fund. It's a factor-weighted ETF with a significant equal-weight tilt.
Comparing 1-Year Returns (as of May 2025)
Assets Under Management (AUM) Distribution
RSP's dominance in AUM highlights its liquidity and popularity among investors.
ETF Deep Dive: Performance, Fees, and Dividends
To identify the best equal weight S&P 500 ETF for 2025, we must examine three pillars: returns, costs, and payouts. Let's dive deep.
1. Performance Comparison (as of May 2025)
Past performance isn't a guarantee, but it reveals how these funds behave across different market cycles.
| ETF | YTD Return | 1-Year Return | 3-Year CAGR | 5-Year CAGR | Max Drawdown (3Y) |
|---|---|---|---|---|---|
| RSP | 9.7% | 18.4% | 12.1% | 11.2% | -13.2% |
| EQL | 9.1% | 17.9% | 11.6% | 10.8% | -14.0% |
| FTA | 10.3% | 19.2% | 13.0% | 12.1% | -15.8% |
| RSPE | 8.2% | 16.5% | N/A | N/A | -12.9% |
| RYT | 12.4% | 21.8% | 15.6% | 13.7% | -18.5% |
| RYF | 10.1% | 19.0% | 12.3% | 10.9% | -14.6% |
| RHS | 7.3% | 14.9% | 9.8% | 9.3% | -9.4% |
| RGI | 9.9% | 18.7% | 11.7% | 11.4% | -12.8% |
| RYH | 7.8% | 15.6% | 10.4% | 10.1% | -10.3% |
| AVUS | 11.2% | 20.2% | 14.1% | 12.8% | -13.1% |
Performance Deep Dive: 5-Year CAGR vs. 3Y Max Drawdown
This chart plots long-term growth (5-Year CAGR) against risk (Max Drawdown over 3 years). The ideal spot is the top-left quadrant (higher return, lower drawdown).
2. Expense Ratio Comparison
Fees can significantly erode long-term returns. Here's what you pay annually for every ₹1,00,000 invested.
| ETF | Expense Ratio | Approx. Fee per ₹1,00,000 Invested / Year |
|---|---|---|
| RSP | 0.20% | ₹200 |
| EQL | 0.27% | ₹270 |
| FTA | 0.65% | ₹650 |
| RSPE | 0.20% | ₹200 |
| RYT | 0.40% | ₹400 |
| RYF | 0.40% | ₹400 |
| RHS | 0.40% | ₹400 |
| RGI | 0.40% | ₹400 |
| RYH | 0.40% | ₹400 |
| AVUS | 0.15% | ₹150 |
My pick? For a blend of low cost and strong performance, AVUS and RSP offer the best value.
Cost of Ownership: Expense Ratios Compared
3. Dividend Yield Comparison
While not typically high-yield investments, these ETFs provide a steady stream of income.
| ETF | Dividend Yield (TTM) | Distribution Frequency | Example Dividend Paid 2024 |
|---|---|---|---|
| RSP | 1.58% | Quarterly | ₹1.48 / unit |
| EQL | 1.42% | Quarterly | $1.42/unit |
| FTA | 1.63% | Quarterly | $1.52/unit |
| RSPE | 1.50% | Quarterly | Quarterly Statement |
| RYT | 0.84% | Quarterly | ₹0.71/unit |
| RYF | 1.99% | Quarterly | ₹1.79/unit |
| RHS | 1.96% | Quarterly | approx $1.82/ unit |
| RGI | 1.77% | Quarterly | ₹1.61/ unit |
| RYH | 1.42% | Quarterly | $1.34/unit |
| AVUS | 1.35% | Quarterly | ₹1.26/unit |
Why the Equal Weight ETF is Better in Volatile Markets
This is where things get interesting. In choppy markets, equal-weight funds are supported by 500 companies equally, rather than relying on a handful of giants like Apple or Amazon for 30-40% of returns. This structure provides two key advantages against volatility.
1. Quarterly Rebalancing: The Automatic "Buy Low, Sell High"
Equal weight ETFs like RSP and EQL rebalance quarterly. This discipline forces the fund to sell shares of stocks that have appreciated (selling high) and buy more shares of stocks that have declined (buying low), all without any emotional decision-making from you.
| Year | S&P 500 (Cap Weighted) | RSP (Equal Weight) | Difference |
|---|---|---|---|
| 2020 | +16.3% | +12.8% | -3.5% |
| 2021 | +26.9% | +29.5% | +2.6% |
| 2022 | -18.1% | -11.6% | +6.5% |
| 2023 | +24.6% | +13.4% | -11.2% |
| 2024 (YTD) | +8.2% | +9.7% | +1.5% |
Annual Performance: Equal Weight (RSP) vs. Cap Weight (SPY)
2. Lower Concentration = Greater Resilience
The cap-weighted S&P 500 has over 35% of its exposure in just the top 10 stocks. For an equal-weight fund? It's just 2%. When markets get shaky, you are not overly dependent on the fate of a few tech giants.
| Top 10 Stock Exposure | Cap-Weighted S&P 500 | RSP (Equal Weight) |
|---|---|---|
| Apple | 6.9% | 0.2% |
| Microsoft | 6.6% | 0.2% |
| NVIDIA | 5.2% | 0.2% |
| Others | 16.8% | 1.5% |
| Total Top 10 | 35.5% | 2.1% |
2025 Sector Exposure and Risk Indicators
Beyond performance, I always analyze sector exposure and risk. The economy is constantly shifting, and your ETF should be positioned to adapt. Equal weight ETFs automatically provide a more balanced sector profile, reducing over-exposure to Big Tech—a potential advantage in 2025.
1. Sector Exposure Comparison (2025)
Equal weighting ensures each sector contributes more symmetrically to the fund's returns. This spread could be a great defense against downside risk if tech stocks disappoint or if sectors like energy, industrials, and materials revive.
Sector Weights: Equal Weight (RSP) vs. Cap Weight (SPY)
| Sector | Equal Weight S&P 500 (RSP) | Cap Weight S&P 500 (SPY) |
|---|---|---|
| Information Tech | 14.2% | 30.3% |
| Healthcare | 13.6% | 12.2% |
| Industrials | 13.1% | 8.7% |
| Consumer Discretionary | 10.8% | 10.4% |
| Financials | 11.4% | 12.1% |
| Energy | 5.7% | 3.7% |
| Utilities | 3.2% | 2.3% |
| Real Estate | 2.9% | 2.5% |
| Consumer Staples | 6.4% | 6.3% |
| Materials | 5.1% | 2.4% |
| Communication Svcs | 3.6% | 8.7% |
2. Risk Metrics Snapshot (3-Year Data as of 2025)
Here’s what I look at to gauge risk and reward efficiency.
| ETF | Beta | Standard Deviation | Sharpe Ratio | Max Drawdown | Tracking Error |
|---|---|---|---|---|---|
| RSP | 1.01 | 17.3% | 0.68 | -13.2% | 3.2% |
| EQL | 1.00 | 17.1% | 0.66 | -14.0% | 3.4% |
| FTA | 1.12 | 18.7% | 0.72 | -15.8% | 4.1% |
| AVUS | 0.97 | 16.4% | 0.78 | -13.1% | 2.8% |
Risk vs. Reward: Key ETF Comparison
A radar chart helps visualize multiple risk/reward metrics at once. A larger area generally indicates a more favorable profile (higher Sharpe Ratio, lower Beta/Std Dev).
What I saw: AVUS and RSP exhibit less volatility than more aggressive funds like FTA. As mid-caps recover in 2025, these Sharpe ratios are improving, indicating better risk-adjusted returns.
Implication for 2025 Allocation
I believe 2025 will be a year of surprises. With inflation cooling and potential rate cuts on the horizon, value-oriented sectors like industrials, healthcare, and financials may take the lead. This is precisely where equal-weight funds excel, offering a diversified bet across the entire economic landscape.
Choosing Your ETF: Cost vs. Liquidity
When choosing between excellent ETFs, the decision often boils down to two key factors: the cost of ownership and the ease of trading. The best fund for you should be both cheap to hold and smooth to trade.
1. Expense Ratio: The Fee You Can't Ignore
A small difference in fees can compound into a significant amount over decades.
AVUS: 0.15% (₹150/yr per Lakh) ✅
RSP: 0.20% (₹200/yr per Lakh) ✅
EQL: 0.27% (₹270/yr per Lakh) ⚠️
FTA: 0.65% (₹650/yr per Lakh) ❌
My preference for long-term core holdings is AVUS and RSP for their combination of low cost and rules-based consistency.
2. Liquidity: Volume & Spread Matter
Liquidity is a deal-breaker. It determines how easily you can buy or sell without a high price slippage (the difference between the buy and sell price).
| ETF | Average Daily Volume (2025) | AUM | Bid-Ask Spread (bps) | Liquidity Grade |
|---|---|---|---|---|
| RSP | ₹900 Cr | $43.6B | 2–3 bps | 🟢 Very High |
| AVUS | ₹550 Cr | $7.8B | 3–5 bps | 🟢 High |
| EQL | ₹110 Cr | $390M | 7–10 bps | 🟡 Medium |
| FTA | ₹150 Cr | $2.4B | 8–12 bps | 🟡 Medium |
| RSPE | ₹40 Cr | $210M | 10–14 bps | 🔴 Low |
My Simple Rule:
- For monthly SIPs (₹10,000 - ₹1 Lakh): Prioritize the expense ratio.
- For large trades or tactical allocations: Prioritize liquidity (volume and spread).
Tax Efficiency and Dividend Yield
When selecting the best ETF, it's not about paper returns; it's about what you keep after taxes and what you earn in passive income. This is a lesson I learned the hard way. A 10% return can quickly become 7% if you ignore tax drag and yield efficiency.
1. Dividend Yield Snapshot (2024-2025)
Most equal-weight ETFs offer modest, steady payouts. The key is to check if the dividends are "qualified," as this can lead to a lower tax rate in the U.S. tax system.
| ETF | Dividend Yield (TTM) | Distribution Frequency | Qualified Dividend? | 2024 Total Div Paid |
|---|---|---|---|---|
| RSP | 1.58% | Quarterly | Yes (90%+) | ₹1.48/unit |
| AVUS | 1.35% | Quarterly | Yes (85–90%) | ₹1.26/unit |
| EQL | 1.42% | Quarterly | Yes | ₹1.42/unit |
| FTA | 1.63% | Quarterly | Mixed | ₹1.52/unit |
| RSPE | 1.50% | Quarterly | Yes | ₹1.38/unit |
2. The Tax Advantage: ETFs vs. Mutual Funds
The structure of ETFs like RSP and AVUS makes them inherently more tax-efficient than many mutual funds, as they rarely distribute capital gains. You postpone the tax until you sell.
Projected Tax Drag (5-Year)
This chart shows the estimated annual return lost to taxes. Lower is better.
My Advice: For taxable accounts, prioritize low-turnover, tax-efficient ETFs like RSP and AVUS. For long-term compounding with minimal tax drag, AVUS is a strong contender.
Step-by-Step Guide: How I'd Invest from India
- Open the Right Account: Choose a domestic broker with U.S. access (like Zerodha via Vested, Groww) or a direct international platform like Interactive Brokers. Complete your KYC and LRS documentation.
- Fund Your Account Smartly: Use services like your bank's wire transfer or fintech platforms like Wise to remit USD. Bundle remittances to save on fees.
- Execute the Trade: Search for your chosen ticker (e.g., RSP, AVUS). Place a "limit order" during U.S. market hours (typically 7 p.m. – 1:30 a.m. IST) to get a fair price.
- Automate Everything: Set up recurring buys for dollar-cost averaging. Use a simple Google Sheet to track your returns in both USD and INR.
- Handle Taxes and Paperwork: Declare all foreign assets and income in your ITR. Use the DTAA (India-US treaty) to claim credit for the 25% dividend tax withheld in the U.S. Your broker will provide the necessary Form 1042-S.
- Rebalance Annually: The ETF rebalances itself quarterly. You only need to rebalance your overall portfolio (e.g., between US stocks, Indian stocks, and debt) once a year.
Common Pitfalls: Mistakes to Avoid
I've made some of these mistakes myself. Equal weight ETFs are powerful, but they have nuances. Here are the biggest mistakes to avoid.
❌ Mistake #1: Thinking All Equal Weight ETFs Are the Same
They are not. RSP offers pure equal exposure. FTA uses a smart-beta filter. AVUS is a broader market fund with an equal-weight tilt. Know what index your ETF tracks.
❌ Mistake #2: Ignoring Liquidity and Spreads
A low-liquidity fund can have a wide bid-ask spread, costing you money on every trade. For large investments, stick to highly liquid ETFs like RSP and AVUS.
❌ Mistake #3: Holding in the Wrong Account
High-turnover funds like FTA can trigger capital gains distributions, which are taxable. Hold them in tax-sheltered accounts if possible. RSP and AVUS are generally better for taxable accounts.
❌ Mistake #4: Panicking During Underperformance
Equal weight ETFs will lag when mega-cap tech is on a tear (like in 2023). This is normal. Do not panic sell; this is how diversification is supposed to work.
❌ Mistake #5: Over-Diversifying with Similar ETFs
Buying RSP, EQL, and AVUS doesn't spread your risk much; it just duplicates exposure. Choose one or two that best fit your strategy.
Conclusion: Securing Your Equal Weight ETF Portfolio
If you've made it this far, you're thinking like a long-term investor. Selecting the best equal weight S&P 500 ETF is about relinquishing some control from overhyped mega-caps to build a portfolio that is more balanced, diversified, and resilient.
I won't claim these ETFs will outperform every single year. They won't. But what they offer, especially heading into 2025, is durability, true sector diversification, and a built-in "buy low, sell high" discipline. For me, moving a part of my portfolio to RSP and AVUS has been a source of stability. It’s a less bumpy ride, with less FOMO and more focus on fundamentals.
What's Next?
- Choose your ETF: Pick the one that suits your goals—RSP for a pure, liquid play, or AVUS for a low-cost, factor-tilted approach.
- Open an international account: Get started with a platform that provides direct U.S. market access.
- Automate your investing: Set up a monthly SIP or quarterly top-ups.
- Track your progress: Monitor your returns and dividends.
- Stay the course: Let the ETF's disciplined strategy work for you over the long term.
⚠️ Disclaimer: This material is for informational purposes only and does not constitute financial advice. Always consult with a SEBI-registered financial advisor before investing. Past performance is not indicative of future results. U.S. investments are subject to currency, geopolitical, and tax risks.
Frequently Asked Questions
An S&P 500 equal weight ETF gives investors equal exposure to all 500 stocks in the S&P 500 index. Unlike a traditional cap-weighted ETF (like SPY), where giants like Apple and Microsoft dominate returns, an equal-weight strategy diversifies risk more uniformly across all companies and sectors.
Based on performance, cost, and liquidity, the top contenders are:
- RSP: The most popular, liquid, and a reliable pure-play.
- AVUS: The lowest cost option with a smart-beta (factor) tilt.
- EQL: A simple, diversified choice with a moderate fee.
Your "best" choice depends on whether you prioritize low fees, trading liquidity, or a specific investment strategy.
They can be, especially during value market rotations or when mega-cap stocks falter. For example, RSP outperformed the cap-weighted SPY by over 6% in 2022. However, they can lag in years when a few tech stocks drive the market, as seen in 2023. They are different, not universally "better," and serve as an excellent diversifier.
Yes, they are taxed. For Indian investors:
- A 25% tax is withheld on dividends in the U.S. You can claim this back as a credit against your Indian tax liability under the India-US Double Taxation Avoidance Agreement (DTAA).
- The dividend income must be declared in your Indian Tax Return (ITR) under "Income from Other Sources," and you can offset the U.S. tax paid.
Always declare this income in your ITR.
Absolutely. You can invest up to $250,000 per financial year under the Liberalised Remittance Scheme (LRS). Platforms like Vested, INDmoney, or Interactive Brokers provide direct access for Indian investors to buy U.S.-listed ETFs like RSP, AVUS, and EQL in US dollars.
Most, like RSP, rebalance quarterly. This means they systematically sell the winners that have grown in value and buy the losers that have fallen, forcing a "buy low, sell high" discipline. This automated rebalancing is a core feature of the strategy.
Yes, definitely, if you:
- Want to avoid being over-exposed to Big Tech.
- Value broad sector diversification.
- Believe in the principle of mean-reversion (what goes down eventually comes up) over momentum.
They can be a solid core holding for a diversified long-term portfolio.
The main risks are:
- Higher Turnover: Frequent rebalancing can lead to slightly higher internal trading costs.
- Underperformance during Tech Booms: They will likely underperform cap-weighted indexes when a handful of mega-cap growth stocks are driving market returns.
These risks are generally offset by the benefits of diversification and better risk-adjusted returns over full market cycles.