Building Your September IRA Strategy: Two ETF Approaches Worth Considering

September often presents unique challenges in financial markets, with historical underperformance patterns that make strategic positioning crucial—especially for retirement portfolios like IRAs. While market timing isn’t a sound investment principle, certain exchange-traded funds demonstrate greater resilience during volatile periods. Two specific ETF structures stand out for investors seeking both stability and potential growth during this seasonally cautious month.

Equal Weighting as a Diversification Answer: The Invesco S&P 500 Approach

When most people think about S&P 500 exposure, they’re picturing market cap-weighted indices—a structure where the largest corporations dominate the portfolio. The Invesco S&P 500 Equal Weight ETF (RSP) operates on a fundamentally different principle.

The distinction carries real implications. As of mid-year 2024, just five mega-cap stocks—Apple, Microsoft, Nvidia, Amazon, and Meta Platforms—comprised over 25% of the traditional S&P 500. This concentration means the index’s movement increasingly tracks a handful of mega-cap performers. In contrast, RSP’s equal-weighting mechanism distributes holdings across 500 companies far more evenly, with its top five holdings representing only about 1.27% of fund assets combined.

Performance data from inception (April 2003) through recent periods shows RSP outpacing the traditional market cap-weighted S&P 500, providing evidence that this diversification approach hasn’t sacrificed returns. For IRA accounts seeking best exposure without undue concentration risk, this structure offers meaningful portfolio protection.

The Income Engine: Dividend-Focused ETF Strategy

While growth narratives dominate market discussion, income-producing assets serve different portfolio functions—particularly valuable for retirement accounts targeting consistent cash flow. The Schwab U.S. Dividend Equity ETF (SCHD) mirrors the Dow Jones U.S. Dividend 100 index, concentrating exclusively on high-dividend-paying companies with verified track records of consistent payouts.

SCHD’s dividend yield routinely runs double the S&P 500’s yield—entering September at 3.35%, creating meaningful income differentials. This ETF achieves broad sector diversification:

This sector-level diversification actively protects against cyclical downturns affecting individual industries. The fund’s leading positions—Lockheed Martin, AbbVie, BlackRock, Coca-Cola, and Home Depot—represent proven dividend aristocrats, most having outpaced S&P 500 performance over the past decade including reinvested dividends.

Structuring the Best Sep IRA Allocation

For retirement accounts evaluating September positioning, these two ETF philosophies address different investor needs. The equal-weighted approach (RSP) prioritizes broad-based exposure without mega-cap concentration. The dividend-focused structure (SCHD) emphasizes income reliability and sector diversification.

Most Sep IRA strategies benefit from understanding this distinction—not choosing one approach exclusively, but recognizing how equal weighting reduces mega-cap risk while dividend concentration provides predictable cash flow. The best Sep investments often combine both principles rather than competing philosophies.

Neither ETF eliminates market risk, and September performance depends on broader economic factors beyond portfolio structure. However, investors constructing retirement accounts during seasonally cautious periods can build more resilient frameworks by selecting funds engineered for stability rather than assuming all equity exposure functions identically.