RSP vs. VMBS: What’s The Difference?

The Invesco S&P 500 Equal Weight ETF (RSP) and the Vanguard Mortgage-Backed Securities Index Fund ETF Shares (VMBS) are both among the Top 100 ETFs. RSP is a Invesco Large Blend fund and VMBS is a Vanguard Intermediate Government fund. So, what’s the difference between RSP and VMBS? And which fund is better?

The expense ratio of RSP is 0.15 percentage points higher than VMBS’s (0.2% vs. 0.05%). RSP also has a high exposure to the technology sector while VMBS is mostly comprised of AAA bonds. Overall, RSP has provided higher returns than VMBS over the past ten years.

In this article, we’ll compare RSP vs. VMBS. We’ll look at annual returns and portfolio growth, as well as at their risk metrics and industry exposure. Moreover, I’ll also discuss RSP’s and VMBS’s performance, holdings, and fund composition and examine how these affect their overall returns.

Summary

RSP VMBS
Name Invesco S&P 500 Equal Weight ETF Vanguard Mortgage-Backed Securities Index Fund ETF Shares
Category Large Blend Intermediate Government
Issuer Invesco Vanguard
AUM 28.62B 16.61B
Avg. Return 13.79% 2.89%
Div. Yield 1.31% 1.23%
Expense Ratio 0.2% 0.05%

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%.

The Vanguard Mortgage-Backed Securities Index Fund ETF Shares (VMBS) is a Intermediate Government fund that is issued by Vanguard. It currently has 16.61B total assets under management and has yielded an average annual return of 2.89% over the past 10 years. The fund has a dividend yield of 1.23% with an expense ratio of 0.05%.

RSP’s dividend yield is 0.08% higher than that of VMBS (1.31% vs. 1.23%). Also, RSP yielded on average 10.90% more per year over the past decade (13.79% vs. 2.89%). The expense ratio of RSP is 0.15 percentage points higher than VMBS’s (0.2% vs. 0.05%).

Fund Composition

Holdings

RSP - Holdings

RSP Holdings Weight
Chipotle Mexican Grill Inc 0.27%
Nike Inc Class B 0.25%
MSCI Inc 0.25%
Monolithic Power Systems Inc 0.25%
Enphase Energy Inc 0.25%
Advanced Micro Devices Inc 0.25%
ResMed Inc 0.24%
PerkinElmer Inc 0.24%
IDEXX Laboratories Inc 0.24%
Danaher Corp 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%.

VMBS - Holdings

VMBS Bond Sectors Weight
AAA 100.01%
Below B 0.0%
B 0.0%
BB 0.0%
BBB 0.0%
A 0.0%
AA 0.0%
US Government 0.0%
Others -0.01%

VMBS’s Top Bond Sectors are ratings of AAA, Below B, B, BB, and BBB at 100.01%, 0.0%, 0.0%, 0.0%, and 0.0%. The fund is less weighted towards A (0.0%), AA (0.0%), and US Government (0.0%) rated bonds.

Risk Analysis

RSP VMBS
Mean Return 1.19 0.21
R-squared 94.47 65.78
Std. Deviation 15.36 2.02
Alpha -2.45 0.37
Beta 1.1 0.54
Sharpe Ratio 0.89 0.94
Treynor Ratio 12.12 3.47

The Invesco S&P 500 Equal Weight ETF (RSP) has a Standard Deviation of 15.36 with a Mean Return of 1.19 and a Sharpe Ratio of 0.89. Its R-squared is 94.47 while RSP’s Treynor Ratio is 12.12. Furthermore, the fund has a Alpha of -2.45 and a Beta of 1.1.

The Vanguard Mortgage-Backed Securities Index Fund ETF Shares (VMBS) has a Treynor Ratio of 3.47 with a R-squared of 65.78 and a Sharpe Ratio of 0.94. Its Beta is 0.54 while VMBS’s Alpha is 0.37. Furthermore, the fund has a Mean Return of 0.21 and a Standard Deviation of 2.02.

RSP’s Mean Return is 0.98 points higher than that of VMBS and its R-squared is 28.69 points higher. With a Standard Deviation of 15.36, RSP is slightly more volatile than VMBS. The Alpha and Beta of RSP are 2.82 points lower and 0.56 points higher than VMBS’s Alpha and Beta.

Performance

Annual Returns

RSP vs. VMBS - Annual Returns

Year RSP VMBS
2020 12.75% 3.77%
2019 28.94% 6.17%
2018 -7.77% 0.87%
2017 18.52% 2.37%
2016 14.34% 1.43%
2015 -2.57% 1.43%
2014 14.02% 5.81%
2013 35.6% -1.28%
2012 17.04% 2.47%
2011 -0.5% 5.89%
2010 21.3% 5.24%

RSP had its best year in 2013 with an annual return of 35.6%. RSP’s worst year over the past decade yielded -7.77% and occurred in 2018. In most years the Invesco S&P 500 Equal Weight ETF provided moderate returns such as in 2014, 2016, and 2012 where annual returns amounted to 14.02%, 14.34%, and 17.04% respectively.

The year 2019 was the strongest year for VMBS, returning 6.17% on an annual basis. The poorest year for VMBS in the last ten years was 2013, with a yield of -1.28%. Most years the Vanguard Mortgage-Backed Securities Index Fund ETF Shares has given investors modest returns, such as in 2017, 2012, and 2020, when gains were 2.37%, 2.47%, and 3.77% respectively.

Portfolio Growth

RSP vs. VMBS - Portfolio Growth

Fund Initial Balance Final Balance CAGR
RSP $10,000 $31,875 13.79%
VMBS $10,000 $13,265 2.89%

A $10,000 investment in RSP would have resulted in a final balance of $31,875. This is a profit of $21,875 over 10 years and amounts to a compound annual growth rate (CAGR) of 13.79%.

With a $10,000 investment in VMBS, the end total would have been $13,265. This equates to a $3,265 profit over 10 years and a compound annual growth rate (CAGR) of 2.89%.

RSP’s CAGR is 10.90 percentage points higher than that of VMBS and as a result, would have yielded $18,610 more on a $10,000 investment. Thus, RSP outperformed VMBS by 10.90% annually.


Current recommendations:

Over the past years, I have discovered several tools and products that have helped me tremendously on my path to financial freedom:

P.S.: The links below are affiliate links, which means I receive a small commission at no extra cost to you when you sign up for one of the services. Thank you for your support!

1) Take a look at M1 Finance, my favorite broker. I love how easy it is to invest and maintain my portfolio with them. I can set up automatic transfers, rebalance my portfolio with one click and even borrow up to 35% of my assets at super low interest rates!

2) Fundrise is by far the best way I've found to invest in Real Estate. You can diversify your portfolio by investing in their eREITs or even allocate capital to individual properties (without the hassle of managing tenants!).

3) If you are interested in crypto, check out Gemini. I've started allocating a small amount of assets to the growing crypto space and Gemini has just been a breeze to use. Once you register, make sure to also open an Active Trader account to buy crypto at the lowest fees on the market (just 0.03%!).

To see all of my most up-to-date recommendations, check out the Recommended Tools section.

Leave a Reply