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Should You Invest in the Invesco S&P 500 Equal Weight Energy ETF (RYE)?

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The Invesco S&P 500 Equal Weight Energy ETF (RYE - Free Report) was launched on 11/01/2006, and is a passively managed exchange traded fund designed to offer broad exposure to the Energy - Broad segment of the equity market.

An increasingly popular option among retail and institutional investors, passively managed ETFs offer low costs, transparency, flexibility, and tax efficiency; they are also excellent vehicles for long term investors.

Additionally, sector ETFs offer convenient ways to gain low risk and diversified exposure to a broad group of companies in particular sectors. Energy - Broad 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 $210.15 million, making it one of the average sized ETFs attempting to match the performance of the Energy - Broad segment of the equity market. 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 is an unmanaged equal weighted version of the S&P 500 Energy Index that consists of the common stocks of the following industries: oil and gas exploration, production, marketing, refining and/or transportation and energy equipment and services industries that comprise the Energy sector of the S&P 500 Index.

Costs

Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.

Annual operating expenses for this ETF are 0.40%, making it one of the cheaper products in the space.

It has a 12-month trailing dividend yield of 2.11%.

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 Energy sector--about 100% of the portfolio.

Looking at individual holdings, Kinder Morgan Inc (KMI - Free Report) accounts for about 4.57% of total assets, followed by Williams Cos Inc/the (WMB - Free Report) and Pioneer Natural Resources Co (PXD - Free Report) .

The top 10 holdings account for about 44.73% of total assets under management.

Performance and Risk

Year-to-date, the Invesco S&P 500 Equal Weight Energy ETF has added roughly 46.72% so far, and was up about 64.82% over the last 12 months (as of 07/01/2021). RYE has traded between $20.65 and $47.19 in this past 52-week period.

The ETF has a beta of 2.14 and standard deviation of 45.75% for the trailing three-year period, making it 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 holds a Zacks ETF Rank of 2 (Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, RYE is an outstanding option for investors seeking exposure to the Energy ETFs segment of the market. There are other additional ETFs in the space that investors could consider as well.

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 $5.33 billion in assets, Energy Select Sector SPDR ETF has $25.75 billion. VDE has an expense ratio of 0.10% and XLE charges 0.12%.

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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