The iShares MSCI Emerging Markets ETF (EEM) and the Invesco S&P 500 Equal Weight ETF (RSP) are both among the Top 100 ETFs. EEM is a iShares Diversified Emerging Mkts fund and RSP is a Invesco Large Blend fund. So, what’s the difference between EEM and RSP? And which fund is better?
The expense ratio of EEM is 0.48 percentage points higher than RSP’s (0.68% vs. 0.2%). EEM also has a higher exposure to the technology sector and a higher standard deviation. Overall, EEM has provided lower returns than RSP over the past ten years.
In this article, we’ll compare EEM vs. RSP. We’ll look at holdings and industry exposure, as well as at their fund composition and portfolio growth. Moreover, I’ll also discuss EEM’s and RSP’s performance, risk metrics, and annual returns and examine how these affect their overall returns.
|Name||iShares MSCI Emerging Markets ETF||Invesco S&P 500 Equal Weight ETF|
|Category||Diversified Emerging Mkts||Large Blend|
The iShares MSCI Emerging Markets ETF (EEM) is a Diversified Emerging Mkts fund that is issued by iShares. It currently has 30.33B total assets under management and has yielded an average annual return of 5.47% over the past 10 years. The fund has a dividend yield of 1.48% with an expense ratio of 0.68%.
The Invesco S&P 500 Equal Weight ETF (RSP) is a Large Blend fund that is issued by Invesco. It currently has 28.62B total assets under management and has yielded an average annual return of 13.79% over the past 10 years. The fund has a dividend yield of 1.31% with an expense ratio of 0.2%.
EEM’s dividend yield is 0.17% higher than that of RSP (1.48% vs. 1.31%). Also, EEM yielded on average 8.32% less per year over the past decade (5.47% vs. 13.79%). The expense ratio of EEM is 0.48 percentage points higher than RSP’s (0.68% vs. 0.2%).
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The iShares MSCI Emerging Markets ETF (EEM) has the most exposure to the Technology sector at 21.36%. This is followed by Financial Services and Consumer Cyclical at 18.39% and 15.16% respectively. Utilities (1.99%), Industrials (4.61%), and Healthcare (5.06%) only make up 11.66% of the fund’s total assets.
EEM’s mid-section with moderate exposure is comprised of Energy, Consumer Defensive, Basic Materials, Communication Services, and Consumer Cyclical stocks at 5.17%, 5.45%, 9.07%, 11.76%, and 15.16%.
The Invesco S&P 500 Equal Weight ETF (RSP) has the most exposure to the Technology sector at 14.73%. This is followed by Industrials and Healthcare at 14.62% and 13.69% respectively. Basic Materials (4.04%), Communication Services (4.31%), and Utilities (5.58%) only make up 13.93% of the fund’s total assets.
RSP’s mid-section with moderate exposure is comprised of Real Estate, Consumer Defensive, Consumer Cyclical, Financial Services, and Healthcare stocks at 5.84%, 6.86%, 13.01%, 13.43%, and 13.69%.
EEM is 6.63% more exposed to the Technology sector than RSP (21.36% vs 14.73%). EEM’s exposure to Financial Services and Consumer Cyclical stocks is 4.96% higher and 2.15% higher respectively (18.39% vs. 13.43% and 15.16% vs. 13.01%). In total, Utilities, Industrials, and Healthcare also make up 22.23% less of the fund’s holdings compared to RSP (11.66% vs. 33.89%).
|Taiwan Semiconductor Manufacturing Co Ltd||6.36%|
|Alibaba Group Holding Ltd Ordinary Shares||4.58%|
|Tencent Holdings Ltd||4.41%|
|Samsung Electronics Co Ltd||4.05%|
|Naspers Ltd Class N||1.04%|
|Reliance Industries Ltd Shs Dematerialised||0.97%|
|China Construction Bank Corp Class H||0.83%|
EEM’s Top Holdings are Taiwan Semiconductor Manufacturing Co Ltd, Alibaba Group Holding Ltd Ordinary Shares, Tencent Holdings Ltd, Samsung Electronics Co Ltd, and Meituan at 6.36%, 4.58%, 4.41%, 4.05%, and 1.24%.
Vale SA (1.04%), Naspers Ltd Class N (1.04%), and Reliance Industries Ltd Shs Dematerialised (0.97%) have a slightly smaller but still significant weight. Infosys Ltd and China Construction Bank Corp Class H are also represented in the EEM’s holdings at 0.92% and 0.83%.
|Chipotle Mexican Grill Inc||0.27%|
|Nike Inc Class B||0.25%|
|Monolithic Power Systems Inc||0.25%|
|Enphase Energy Inc||0.25%|
|Advanced Micro Devices Inc||0.25%|
|IDEXX Laboratories Inc||0.24%|
RSP’s Top Holdings are Chipotle Mexican Grill Inc, Nike Inc Class B, MSCI Inc, Monolithic Power Systems Inc, and Enphase Energy Inc at 0.27%, 0.25%, 0.25%, 0.25%, and 0.25%.
Advanced Micro Devices Inc (0.25%), ResMed Inc (0.24%), and PerkinElmer Inc (0.24%) have a slightly smaller but still significant weight. IDEXX Laboratories Inc and Danaher Corp are also represented in the RSP’s holdings at 0.24% and 0.24%.
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The iShares MSCI Emerging Markets ETF (EEM) has a Mean Return of 0.38 with a Treynor Ratio of 2.22 and a Beta of 1.08. Its Sharpe Ratio is 0.22 while EEM’s Standard Deviation is 17.79. Furthermore, the fund has a Alpha of -2.33 and a R-squared of 83.5.
The Invesco S&P 500 Equal Weight ETF (RSP) has a Alpha of -2.45 with a R-squared of 94.47 and a Sharpe Ratio of 0.89. Its Beta is 1.1 while RSP’s Treynor Ratio is 12.12. Furthermore, the fund has a Mean Return of 1.19 and a Standard Deviation of 15.36.
EEM’s Mean Return is 0.81 points lower than that of RSP and its R-squared is 10.97 points lower. With a Standard Deviation of 17.79, EEM is slightly more volatile than RSP. The Alpha and Beta of EEM are 0.12 points higher and 0.02 points lower than RSP’s Alpha and Beta.
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EEM had its best year in 2017 with an annual return of 36.42%. EEM’s worst year over the past decade yielded -18.87% and occurred in 2011. In most years the iShares MSCI Emerging Markets ETF provided moderate returns such as in 2014, 2016, and 2010 where annual returns amounted to -2.82%, 10.51%, and 15.93% respectively.
The year 2013 was the strongest year for RSP, returning 35.6% on an annual basis. The poorest year for RSP in the last ten years was 2018, with a yield of -7.77%. Most years the Invesco S&P 500 Equal Weight ETF has given investors modest returns, such as in 2014, 2016, and 2012, when gains were 14.02%, 14.34%, and 17.04% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in EEM would have resulted in a final balance of $15,578. This is a profit of $5,578 over 11 years and amounts to a compound annual growth rate (CAGR) of 5.47%.
With a $10,000 investment in RSP, the end total would have been $38,664. This equates to a $28,664 profit over 11 years and a compound annual growth rate (CAGR) of 13.79%.
EEM’s CAGR is 8.32 percentage points lower than that of RSP and as a result, would have yielded $23,086 less on a $10,000 investment. Thus, EEM performed worse than RSP by 8.32% annually.
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