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Is Invesco S&P 500 Equal Weight Financials ETF (RYF) a Strong ETF Right Now?

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A smart beta exchange traded fund, the Invesco S&P 500 Equal Weight Financials ETF debuted on 11/01/2006, and offers broad exposure to the Financials ETFs category of the market.

What Are Smart Beta ETFs?

The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.

Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.

If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking non-cap weighted strategies.

By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.

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

Because the fund has amassed over $416.16 million, this makes it one of the average sized ETFs in the Financials ETFs. RYF is managed by Invesco. Before fees and expenses, this particular fund seeks to match the performance of the S&P 500 Equal Weight Financials Index.

The S&P 500 Equal Weight Financials Index equally weights stocks in the financial sector of the S&P 500 Index.

Cost & Other Expenses

Expense ratios are an important factor in the return of an ETF and in the long-term, cheaper funds can significantly outperform their more expensive cousins, other things remaining the same.

With on par with most peer products in the space, this ETF has annual operating expenses of 0.40%.

The fund has a 12-month trailing dividend yield of 2.10%.

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.

This ETF has heaviest allocation in the Financials sector - about 100% of the portfolio.

Looking at individual holdings, Allstate Corp/the (ALL - Free Report) accounts for about 1.83% of total assets, followed by M&t Bank Corp (MTB - Free Report) and People's United Financial Inc .

RYF's top 10 holdings account for about 17.36% of its total assets under management.

Performance and Risk

The ETF has lost about -19.03% and is down about -10.67% so far this year and in the past one year (as of 07/15/2022), respectively. RYF has traded between $51.80 and $67.90 during this last 52-week period.

The ETF has a beta of 1.14 and standard deviation of 31.99% for the trailing three-year period, making it a medium risk choice in the space. With about 69 holdings, it effectively diversifies company-specific risk.

Alternatives

Invesco S&P 500 Equal Weight Financials ETF is an excellent option for investors seeking to outperform the Financials ETFs segment of the market. There are other ETFs in the space which investors could consider as well.

Vanguard Financials ETF (VFH - Free Report) tracks MSCI US Investable Market Financials 25/50 Index and the Financial Select Sector SPDR ETF (XLF - Free Report) tracks Financial Select Sector Index. Vanguard Financials ETF has $8.38 billion in assets, Financial Select Sector SPDR ETF has $28.02 billion. VFH has an expense ratio of 0.10% and XLF 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 Financials 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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