RSPA vs RSP and FYEE vs FELC: Do Income ETFs Win?

RSPA pays around 9% a year. FYEE pays around 7-8%. RSP and FELC, the funds that hold the same underlying stocks without the income overlay, pay closer to 1.5%.

The high-yield versions look like an easy win. But the yield isn’t free. The options strategy that produces it caps upside, the higher expense ratio costs a little every year, and the distributions are taxed as ordinary income instead of as qualified dividends. Over a decade, those three drags can swing the math against you.

Here’s the honest comparison, side by side.

The Short Answer

If you’re in a taxable account and accumulating wealth for years before you need the income, the pure-play versions (RSP and FELC) usually win on after-tax total return. If you’re in an IRA or Roth IRA and actually want the monthly cash flow right now, the income-enhanced versions (RSPA and FYEE) become competitive. The bigger the marginal tax rate and the stronger the bull market, the harder it is for the income versions to keep up.

We built a free simulator that runs both pairs across any time horizon, tax bracket, and assumed underlying return. Open the Income ETF vs Underlying Simulator to plug in your numbers.

What Each ETF Actually Holds

RSPA (Invesco S&P 500 Equal Weight Income Advantage) holds all 500 stocks in the S&P 500 in equal weight. Then Invesco wraps roughly 10% of net assets in short-term equity-linked notes designed to throw off high monthly income. Distribution yield: about 9%, paid monthly. Expense ratio: 0.29%. Launched in July 2024.

RSP (Invesco S&P 500 Equal Weight) holds the same 500 stocks in the same equal weights. No options, no ELNs, no income overlay. Just the stocks. Dividend yield: around 1.5%, paid quarterly, mostly as qualified dividends. Expense ratio: 0.20%. Been around since 2003.

FYEE (Fidelity Yield Enhanced Equity) holds a portfolio of 170 large-cap stocks chosen by Fidelity’s quantitative model. Then Fidelity writes short call options against the portfolio, rebalanced weekly. The premiums fund roughly 7-8% in quarterly distributions. Expense ratio: 0.32%. Newer fund.

FELC (Fidelity Enhanced Large Cap Core) uses the same Fidelity quant model to pick the same kind of large-cap stocks. No options overlay. Dividend yield: around 1.3% in qualified dividends. Expense ratio: 0.18%.

So each pair holds the same equities. The only meaningful difference is the option or ELN overlay that generates the income.

How the Math Actually Plays Out

Here’s a clean apples-to-apples scenario. $50,000 invested. 10 years. Underlying total return assumed at 8% per year (close to the S&P 500’s long-term average). 24% marginal tax bracket. Distributions reinvested after tax.

RSPA path:

• Total return ≈ 8% underlying minus 1.5% call-premium drag minus 0.09% expense difference = roughly 6.4%
• Distribution: 9%, NAV change: roughly -2.6% per year (NAV erodes because more is paid out than the portfolio earns)
• Each year’s $4,500 (year 1) distribution gets taxed at 24% ordinary, leaving $3,420 to reinvest
• After 10 years: NAV has shrunk significantly, but you’ve collected substantial after-tax income along the way

RSP path:

• Total return ≈ 8% underlying minus 0% drag = 8.0%
• Dividend: 1.5%, NAV change: 6.5% per year
• Each year’s $750 (year 1) dividend gets taxed at 15% qualified, leaving $637.50 to reinvest
• After 10 years: NAV roughly doubled, dividends compounded quietly

The simulator does the actual year-by-year math, and the winner shifts depending on the assumed return. Push the underlying return up to 12% (strong bull market) and RSP runs away with it. Drop it to 4% (sideways market) and RSPA’s distributions start to close the gap.

The Three Hidden Costs of High Yield

Most income-ETF marketing leads with the yield. Three costs almost never make it into the pitch.

Cost 1: Call-premium drag. Selling call options is a trade. You collect the premium, but you give up the upside above the strike price. In choppy markets that don’t move much, the trade is great. In bull markets where the underlying rallies hard, you’re capped. Studies of similar covered-call strategies suggest the drag averages 1-2% of annual total return over a market cycle. RSPA’s ELN approach has a similar effective cost.

Cost 2: Higher expense ratio. RSPA charges 0.29% versus RSP’s 0.20%. FYEE charges 0.32% versus FELC’s 0.18%. That difference of 0.09-0.14% per year sounds small, but over 20 years on $100,000, it compounds into thousands of dollars in lost growth.

Cost 3: Tax classification. This one’s the biggest. RSP and FELC dividends are mostly qualified, taxed at 0% / 15% / 20% depending on your income. RSPA’s ELN distributions and FYEE’s option-premium distributions are mostly taxed as ordinary income. If your marginal rate is 24% and you’d otherwise pay 15% on qualified dividends, you’re losing 9 percentage points of every distribution to taxes. On a 9% yield, that’s roughly 0.8% of additional drag per year, every year.

Add those three up: 1.5% + 0.1% + 0.8% = roughly 2.4% of annual drag, applied to the same underlying portfolio.

When the Income Version Actually Makes Sense

There are scenarios where RSPA and FYEE genuinely win or break even. They’re worth knowing.

You hold it in an IRA or Roth IRA. The tax drag disappears entirely inside tax-advantaged accounts. In an IRA you pay ordinary income on withdrawal regardless. In a Roth you pay nothing at all. Set the simulator’s tax rate to 0% and the income version closes most of the gap.

You’re retired and need the income now. The whole point of generating monthly cash flow is that you actually spend it. If you’re 67 and your $500,000 portfolio needs to throw off $3,500 per month, RSPA hands you $3,750 in distributions every month without you needing to sell shares. Selling shares in a down market is what wrecks retirement portfolios. Living off distributions sidesteps that risk.

You worry about mega-cap concentration. The S&P 500 is currently dominated by a handful of giant tech names. RSP and RSPA, being equal-weight, give you much less exposure to that concentration. Some investors specifically want that. If you do, RSPA gives it to you with the income on top.

You’re in a long sideways market. When the underlying isn’t going anywhere, the call-premium drag doesn’t cost much (there’s not much upside to give up) and the income still flows. The income versions can outperform in those conditions.

When the Pure Play Wins Cleanly

Bull markets, taxable accounts, long holding periods, and high marginal tax brackets all push hard toward RSP and FELC.

The longer your horizon, the more compounding works in favor of the version that keeps full upside. Twenty years of even a 1.5% annual drag turns into a 30%+ gap in final wealth. The math doesn’t care about your feelings about monthly income.

The Real Decision Framework

Forget which ETF “wins” in some generic sense. The question that matters is what role you need this slot in your portfolio to play.

Do you need cash flow now? Income version, ideally in a tax-advantaged account.

Are you accumulating and want max long-term wealth? Pure-play version, all day.

Are you a retiree who wants both stable monthly income and equal-weight diversification? RSPA is an interesting fit.

Are you betting on Fidelity’s quant model and want a touch of income while still riding the underlying? FYEE.

Are you young, in a high tax bracket, and decades from retirement? FELC or RSP, full stop. The income version is solving a problem you don’t have.

Run your own numbers on the income ETF simulator. Change the time horizon, your tax bracket, and the assumed underlying return. The winner shifts more than you’d think.