We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Is Invesco S&P 500 Equal Weight Energy ETF (RYE) a Strong ETF Right Now?
Read MoreHide Full Article
The Invesco S&P 500 Equal Weight Energy ETF was launched on 11/01/2006, and is a smart beta exchange traded fund designed to offer broad exposure to the Energy ETFs category of the market.
What Are Smart Beta ETFs?
The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the market or a particular market segment.
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.
There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.
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.
While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.
Fund Sponsor & Index
Because the fund has amassed over $610.13 million, this makes it one of the average sized ETFs in the Energy ETFs. RYE is managed by Invesco. RYE seeks to match the performance of the S&P 500 Equal Weight Energy Index before fees and expenses.
The S&P 500 Equal Weight Energy Index equally weights stocks in the energy sector of the S&P 500 Index.
Cost & Other Expenses
Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain 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's 12-month trailing dividend yield comes in at 1.84%.
Sector Exposure and Top Holdings
It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
For RYE, it has heaviest allocation in the Energy sector --about 100% of the portfolio.
Taking into account individual holdings, Occidental Petroleum Corp (OXY - Free Report) accounts for about 6.41% of the fund's total assets, followed by Apa Corp (APA - Free Report) and Marathon Oil Corp (MRO - Free Report) .
The top 10 holdings account for about 49.72% of total assets under management.
Performance and Risk
Year-to-date, the Invesco S&P 500 Equal Weight Energy ETF has gained about 47.07% so far, and it's up approximately 65.85% over the last 12 months (as of 05/17/2022). RYE has traded between $37.22 and $72.81 in this past 52-week period.
RYE has a beta of 1.69 and standard deviation of 47.53% for the trailing three-year period, which makes the fund a high risk choice in the space. With about 24 holdings, it has more concentrated exposure than peers.
Alternatives
Invesco S&P 500 Equal Weight Energy ETF is a reasonable option for investors seeking to outperform the Energy ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
Vanguard Energy ETF (VDE - Free Report) tracks MSCI US Investable Market Energy 25/50 Index and the Energy Select Sector SPDR ETF (XLE - Free Report) tracks Energy Select Sector Index. Vanguard Energy ETF has $8.67 billion in assets, Energy Select Sector SPDR ETF has $40.29 billion. VDE has an expense ratio of 0.10% and XLE 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 Energy 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.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Is Invesco S&P 500 Equal Weight Energy ETF (RYE) a Strong ETF Right Now?
The Invesco S&P 500 Equal Weight Energy ETF was launched on 11/01/2006, and is a smart beta exchange traded fund designed to offer broad exposure to the Energy ETFs category of the market.
What Are Smart Beta ETFs?
The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the market or a particular market segment.
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.
There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.
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.
While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.
Fund Sponsor & Index
Because the fund has amassed over $610.13 million, this makes it one of the average sized ETFs in the Energy ETFs. RYE is managed by Invesco. RYE seeks to match the performance of the S&P 500 Equal Weight Energy Index before fees and expenses.
The S&P 500 Equal Weight Energy Index equally weights stocks in the energy sector of the S&P 500 Index.
Cost & Other Expenses
Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain 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's 12-month trailing dividend yield comes in at 1.84%.
Sector Exposure and Top Holdings
It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
For RYE, it has heaviest allocation in the Energy sector --about 100% of the portfolio.
Taking into account individual holdings, Occidental Petroleum Corp (OXY - Free Report) accounts for about 6.41% of the fund's total assets, followed by Apa Corp (APA - Free Report) and Marathon Oil Corp (MRO - Free Report) .
The top 10 holdings account for about 49.72% of total assets under management.
Performance and Risk
Year-to-date, the Invesco S&P 500 Equal Weight Energy ETF has gained about 47.07% so far, and it's up approximately 65.85% over the last 12 months (as of 05/17/2022). RYE has traded between $37.22 and $72.81 in this past 52-week period.
RYE has a beta of 1.69 and standard deviation of 47.53% for the trailing three-year period, which makes the fund a high risk choice in the space. With about 24 holdings, it has more concentrated exposure than peers.
Alternatives
Invesco S&P 500 Equal Weight Energy ETF is a reasonable option for investors seeking to outperform the Energy ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
Vanguard Energy ETF (VDE - Free Report) tracks MSCI US Investable Market Energy 25/50 Index and the Energy Select Sector SPDR ETF (XLE - Free Report) tracks Energy Select Sector Index. Vanguard Energy ETF has $8.67 billion in assets, Energy Select Sector SPDR ETF has $40.29 billion. VDE has an expense ratio of 0.10% and XLE 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 Energy 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.