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Should You Invest in the Invesco Dynamic Software ETF (PSJ)?

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Designed to provide broad exposure to the Technology - Software segment of the equity market, the Invesco Dynamic Software ETF (PSJ - Free Report) is a passively managed exchange traded fund launched on 06/23/2005.

Retail and institutional investors increasingly turn to passively managed ETFs because they offer low costs, transparency, flexibility, and tax efficiency; these kind of funds are also excellent vehicles for long term investors.

Investor-friendly, sector ETFs provide many options to gain low risk and diversified exposure to a broad group of companies in particular sectors. Technology - Software is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 10, placing it in bottom 38%.

Index Details

The fund is sponsored by Invesco. It has amassed assets over $537.96 million, making it one of the average sized ETFs attempting to match the performance of the Technology - Software segment of the equity market. PSJ seeks to match the performance of the Dynamic Software Intellidex Index before fees and expenses.

The index is comprised of stocks of software companies. The Index is designed to provide capital appreciation by thoroughly evaluating companies based on a variety of investment merit criteria, including fundamental growth, stock valuation, investment timeliness and risk factors.

Costs

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.

Annual operating expenses for this ETF are 0.58%, making it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 0.08%.

Sector Exposure and Top Holdings

ETFs offer a 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 Information Technology sector--about 62.20% of the portfolio. Telecom and Healthcare round out the top three.

Looking at individual holdings, Snap Inc (SNAP - Free Report) accounts for about 6.01% of total assets, followed by Docusign Inc (DOCU - Free Report) and Liberty Broadband Corp (LBRDK - Free Report) .

The top 10 holdings account for about 45.62% of total assets under management.

Performance and Risk

So far this year, PSJ has added roughly 31.58%, and was up about 43.12% in the last one year (as of 10/22/2020). During this past 52-week period, the fund has traded between $74.11 and $133.31.

The ETF has a beta of 1.02 and standard deviation of 27.25% for the trailing three-year period, making it a high risk choice in the space. With about 31 holdings, it has more concentrated exposure than peers.

Alternatives

Invesco Dynamic Software ETF holds a Zacks ETF Rank of 1 (Strong Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, PSJ is an outstanding option for investors seeking exposure to the Technology ETFs segment of the market. There are other additional ETFs in the space that investors could consider as well.

SPDR SP Software Services ETF (XSW - Free Report) tracks S&P Software & Services Select Industry Index and the iShares Expanded TechSoftware Sector ETF (IGV - Free Report) tracks S&P North American Technology-Software Index. SPDR SP Software Services ETF has $275.46 million in assets, iShares Expanded TechSoftware Sector ETF has $5.50 billion. XSW has an expense ratio of 0.35% and IGV charges 0.46%.

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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