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Is Invesco S&P 500 Equal Weight Materials ETF (RTM) a Strong ETF Right Now?
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The Invesco S&P 500 Equal Weight Materials ETF was launched on 11/01/2006, and is a smart beta exchange traded fund designed to offer broad exposure to the Materials 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 work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.
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.
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
The fund is managed by Invesco, and has been able to amass over $467.25 million, which makes it one of the average sized ETFs in the Materials ETFs. This particular fund, before fees and expenses, seeks to match the performance of the S&P 500 Equal Weight Materials Index.
The S&P 500 Equal Weight Materials Index is an unmanaged equal weighted version of the S&P 500 Materials Index that consists of the common stocks of the following industries: chemicals, construction materials, containers and packaging, metals and mining, and paper and forest products that comprise the Materials sector of the S&P 500 Index.
Cost & Other Expenses
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 RTM are 0.40%, which makes it one of the cheaper products in the space.
The fund has a 12-month trailing dividend yield of 1.37%.
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.
For RTM, it has heaviest allocation in the Materials sector --about 100% of the portfolio.
Looking at individual holdings, Ball Corp accounts for about 3.81% of total assets, followed by International Flavors & Fragrances Inc (IFF - Free Report) and Sealed Air Corp (SEE - Free Report) .
Its top 10 holdings account for approximately 37.48% of RTM's total assets under management.
Performance and Risk
Year-to-date, the Invesco S&P 500 Equal Weight Materials ETF has added roughly 28.33% so far, and is up about 41.06% over the last 12 months (as of 11/08/2021). RTM has traded between $127.08 and $177.38 in this past 52-week period.
The fund has a beta of 1.10 and standard deviation of 28.05% for the trailing three-year period, which makes RTM a medium risk choice in this particular space. With about 30 holdings, it has more concentrated exposure than peers.
Alternatives
Invesco S&P 500 Equal Weight Materials ETF is an excellent option for investors seeking to outperform the Materials ETFs segment of the market. There are other ETFs in the space which investors could consider as well.
FlexShares Morningstar Global Upstream Natural Resources ETF (GUNR - Free Report) tracks Morningstar Global Upstream Natural Resources Index and the Materials Select Sector SPDR ETF (XLB - Free Report) tracks Materials Select Sector Index. FlexShares Morningstar Global Upstream Natural Resources ETF has $6.11 billion in assets, Materials Select Sector SPDR ETF has $7.91 billion. GUNR has an expense ratio of 0.46% and XLB charges 0.12%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Materials 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 Materials ETF (RTM) a Strong ETF Right Now?
The Invesco S&P 500 Equal Weight Materials ETF was launched on 11/01/2006, and is a smart beta exchange traded fund designed to offer broad exposure to the Materials 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 work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.
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.
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
The fund is managed by Invesco, and has been able to amass over $467.25 million, which makes it one of the average sized ETFs in the Materials ETFs. This particular fund, before fees and expenses, seeks to match the performance of the S&P 500 Equal Weight Materials Index.
The S&P 500 Equal Weight Materials Index is an unmanaged equal weighted version of the S&P 500 Materials Index that consists of the common stocks of the following industries: chemicals, construction materials, containers and packaging, metals and mining, and paper and forest products that comprise the Materials sector of the S&P 500 Index.
Cost & Other Expenses
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 RTM are 0.40%, which makes it one of the cheaper products in the space.
The fund has a 12-month trailing dividend yield of 1.37%.
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.
For RTM, it has heaviest allocation in the Materials sector --about 100% of the portfolio.
Looking at individual holdings, Ball Corp accounts for about 3.81% of total assets, followed by International Flavors & Fragrances Inc (IFF - Free Report) and Sealed Air Corp (SEE - Free Report) .
Its top 10 holdings account for approximately 37.48% of RTM's total assets under management.
Performance and Risk
Year-to-date, the Invesco S&P 500 Equal Weight Materials ETF has added roughly 28.33% so far, and is up about 41.06% over the last 12 months (as of 11/08/2021). RTM has traded between $127.08 and $177.38 in this past 52-week period.
The fund has a beta of 1.10 and standard deviation of 28.05% for the trailing three-year period, which makes RTM a medium risk choice in this particular space. With about 30 holdings, it has more concentrated exposure than peers.
Alternatives
Invesco S&P 500 Equal Weight Materials ETF is an excellent option for investors seeking to outperform the Materials ETFs segment of the market. There are other ETFs in the space which investors could consider as well.
FlexShares Morningstar Global Upstream Natural Resources ETF (GUNR - Free Report) tracks Morningstar Global Upstream Natural Resources Index and the Materials Select Sector SPDR ETF (XLB - Free Report) tracks Materials Select Sector Index. FlexShares Morningstar Global Upstream Natural Resources ETF has $6.11 billion in assets, Materials Select Sector SPDR ETF has $7.91 billion. GUNR has an expense ratio of 0.46% and XLB charges 0.12%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Materials 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.