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Is Invesco Defensive Equity ETF (DEF) a Strong ETF Right Now?
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Launched on 12/15/2006, the Invesco Defensive Equity ETF is a smart beta exchange traded fund offering broad exposure to the Style Box - Large Cap Growth category of the market.
What Are Smart Beta ETFs?
Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.
Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.
However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.
Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other such characteristics.
Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.
Fund Sponsor & Index
The fund is sponsored by Invesco. It has amassed assets over $253.11 million, making it one of the average sized ETFs in the Style Box - Large Cap Growth. DEF seeks to match the performance of the Guggenheim Defensive Equity Index before fees and expenses.
The Guggenheim Defensive Equity Index is comprised of approximately 100 stocks selected from the S&P 500 Index based on investment and other screening criteria. The companies selected have potentially superior risk-return profiles during periods of stock market weakness while still offering the potential for gains during periods of market strength.
Cost & Other Expenses
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive cousins if all other fundamentals are the same.
Operating expenses on an annual basis are 0.53% for DEF, making it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 1.23%.
Sector Exposure and Top Holdings
ETFs offer diversified exposure and thus minimize single stock risk, but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.
DEF's heaviest allocation is in the Healthcare sector, which is about 21.30% of the portfolio. Its Information Technology and Industrials round out the top three.
Looking at individual holdings, Amgen Inc (AMGN - Free Report) accounts for about 1.06% of total assets, followed by Ebay Inc (EBAY - Free Report) and Quest Diagnostics Inc (DGX - Free Report) .
DEF's top 10 holdings account for about 10.46% of its total assets under management.
Performance and Risk
Year-to-date, the Invesco Defensive Equity ETF has added about 10.81% so far, and is up about 32.93% over the last 12 months (as of 05/24/2021). DEF has traded between $49.44 and $64.97 in this past 52-week period.
The ETF has a beta of 0.87 and standard deviation of 21.70% for the trailing three-year period, making it a medium risk choice in the space. With about 102 holdings, it effectively diversifies company-specific risk.
Alternatives
Invesco Defensive Equity ETF is a reasonable option for investors seeking to outperform the Style Box - Large Cap Growth segment of the market. However, there are other ETFs in the space which investors could consider.
Vanguard Growth ETF (VUG - Free Report) tracks CRSP U.S. Large Cap Growth Index and the Invesco QQQ (QQQ - Free Report) tracks NASDAQ-100 Index. Vanguard Growth ETF has $71.98 billion in assets, Invesco QQQ has $156.57 billion. VUG has an expense ratio of 0.04% and QQQ charges 0.20%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box - Large Cap Growth.
Bottom Line
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.
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Is Invesco Defensive Equity ETF (DEF) a Strong ETF Right Now?
Launched on 12/15/2006, the Invesco Defensive Equity ETF is a smart beta exchange traded fund offering broad exposure to the Style Box - Large Cap Growth category of the market.
What Are Smart Beta ETFs?
Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.
Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.
However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.
Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other such characteristics.
Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.
Fund Sponsor & Index
The fund is sponsored by Invesco. It has amassed assets over $253.11 million, making it one of the average sized ETFs in the Style Box - Large Cap Growth. DEF seeks to match the performance of the Guggenheim Defensive Equity Index before fees and expenses.
The Guggenheim Defensive Equity Index is comprised of approximately 100 stocks selected from the S&P 500 Index based on investment and other screening criteria. The companies selected have potentially superior risk-return profiles during periods of stock market weakness while still offering the potential for gains during periods of market strength.
Cost & Other Expenses
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive cousins if all other fundamentals are the same.
Operating expenses on an annual basis are 0.53% for DEF, making it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 1.23%.
Sector Exposure and Top Holdings
ETFs offer diversified exposure and thus minimize single stock risk, but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.
DEF's heaviest allocation is in the Healthcare sector, which is about 21.30% of the portfolio. Its Information Technology and Industrials round out the top three.
Looking at individual holdings, Amgen Inc (AMGN - Free Report) accounts for about 1.06% of total assets, followed by Ebay Inc (EBAY - Free Report) and Quest Diagnostics Inc (DGX - Free Report) .
DEF's top 10 holdings account for about 10.46% of its total assets under management.
Performance and Risk
Year-to-date, the Invesco Defensive Equity ETF has added about 10.81% so far, and is up about 32.93% over the last 12 months (as of 05/24/2021). DEF has traded between $49.44 and $64.97 in this past 52-week period.
The ETF has a beta of 0.87 and standard deviation of 21.70% for the trailing three-year period, making it a medium risk choice in the space. With about 102 holdings, it effectively diversifies company-specific risk.
Alternatives
Invesco Defensive Equity ETF is a reasonable option for investors seeking to outperform the Style Box - Large Cap Growth segment of the market. However, there are other ETFs in the space which investors could consider.
Vanguard Growth ETF (VUG - Free Report) tracks CRSP U.S. Large Cap Growth Index and the Invesco QQQ (QQQ - Free Report) tracks NASDAQ-100 Index. Vanguard Growth ETF has $71.98 billion in assets, Invesco QQQ has $156.57 billion. VUG has an expense ratio of 0.04% and QQQ charges 0.20%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box - Large Cap Growth.
Bottom Line
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.