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Is Invesco S&P 500 Equal Weight Consumer Discretionary ETF (RCD) a Strong ETF Right Now?
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Designed to provide broad exposure to the Consumer Discretionary ETFs category of the market, the Invesco S&P 500 Equal Weight Consumer Discretionary ETF is a smart beta exchange traded fund launched on 11/01/2006.
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.
Market cap weighted indexes work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.
On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.
This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix of such characteristics.
The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.
Fund Sponsor & Index
RCD is managed by Invesco, and this fund has amassed over $470.84 million, which makes it one of the larger ETFs in the Consumer Discretionary ETFs. RCD, before fees and expenses, seeks to match the performance of the S&P 500 Equal Weight Consumer Discretionary Index.
The S&P 500 Equal Weight Consumer Discretionary Index equally weights stocks in the consumer discretionary sector of the S&P 500 Index.
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 0.40% for this ETF, which makes it one of the cheaper products in the space.
It has a 12-month trailing dividend yield of 0.59%.
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.
Representing 100% of the portfolio, the fund has heaviest allocation to the Consumer Discretionary sector.
Looking at individual holdings, Tesla Inc (TSLA - Free Report) accounts for about 2.35% of total assets, followed by Ford Motor Co (F - Free Report) and Dollar Tree Inc (DLTR - Free Report) .
RCD's top 10 holdings account for about 18.84% of its total assets under management.
Performance and Risk
The ETF has lost about -10.75% so far this year and it's up approximately 3.71% in the last one year (as of 03/03/2022). In the past 52-week period, it has traded between $131.66 and $160.55.
RCD has a beta of 1.40 and standard deviation of 29.46% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 65 holdings, it effectively diversifies company-specific risk.
Alternatives
Invesco S&P 500 Equal Weight Consumer Discretionary ETF is a reasonable option for investors seeking to outperform the Consumer Discretionary ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
Vanguard Consumer Discretionary ETF (VCR - Free Report) tracks MSCI US Investable Market Consumer Discretionary 25/50 Index and the Consumer Discretionary Select Sector SPDR ETF (XLY - Free Report) tracks Consumer Discretionary Select Sector Index. Vanguard Consumer Discretionary ETF has $6.06 billion in assets, Consumer Discretionary Select Sector SPDR ETF has $19.70 billion. VCR has an expense ratio of 0.10% and XLY charges 0.10%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Consumer Discretionary ETFs.
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 S&P 500 Equal Weight Consumer Discretionary ETF (RCD) a Strong ETF Right Now?
Designed to provide broad exposure to the Consumer Discretionary ETFs category of the market, the Invesco S&P 500 Equal Weight Consumer Discretionary ETF is a smart beta exchange traded fund launched on 11/01/2006.
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.
Market cap weighted indexes work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.
On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.
This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix of such characteristics.
The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.
Fund Sponsor & Index
RCD is managed by Invesco, and this fund has amassed over $470.84 million, which makes it one of the larger ETFs in the Consumer Discretionary ETFs. RCD, before fees and expenses, seeks to match the performance of the S&P 500 Equal Weight Consumer Discretionary Index.
The S&P 500 Equal Weight Consumer Discretionary Index equally weights stocks in the consumer discretionary sector of the S&P 500 Index.
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 0.40% for this ETF, which makes it one of the cheaper products in the space.
It has a 12-month trailing dividend yield of 0.59%.
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.
Representing 100% of the portfolio, the fund has heaviest allocation to the Consumer Discretionary sector.
Looking at individual holdings, Tesla Inc (TSLA - Free Report) accounts for about 2.35% of total assets, followed by Ford Motor Co (F - Free Report) and Dollar Tree Inc (DLTR - Free Report) .
RCD's top 10 holdings account for about 18.84% of its total assets under management.
Performance and Risk
The ETF has lost about -10.75% so far this year and it's up approximately 3.71% in the last one year (as of 03/03/2022). In the past 52-week period, it has traded between $131.66 and $160.55.
RCD has a beta of 1.40 and standard deviation of 29.46% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 65 holdings, it effectively diversifies company-specific risk.
Alternatives
Invesco S&P 500 Equal Weight Consumer Discretionary ETF is a reasonable option for investors seeking to outperform the Consumer Discretionary ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
Vanguard Consumer Discretionary ETF (VCR - Free Report) tracks MSCI US Investable Market Consumer Discretionary 25/50 Index and the Consumer Discretionary Select Sector SPDR ETF (XLY - Free Report) tracks Consumer Discretionary Select Sector Index. Vanguard Consumer Discretionary ETF has $6.06 billion in assets, Consumer Discretionary Select Sector SPDR ETF has $19.70 billion. VCR has an expense ratio of 0.10% and XLY charges 0.10%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Consumer Discretionary ETFs.
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.