Back to top

Image: Bigstock

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

Read MoreHide Full Article

A smart beta exchange traded fund, the Invesco S&P 500 Equal Weight ETF (RSP - Free Report) debuted on 04/24/2003, and offers broad exposure to the Style Box - Large Cap Blend 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.

Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well 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

The fund is managed by Invesco, and has been able to amass over $31.40 billion, which makes it one of the largest ETFs in the Style Box - Large Cap Blend. This particular fund, before fees and expenses, seeks to match the performance of the S&P 500 Equal Weight Index.

The S&P 500 Equal Weight Index is an unmanaged equal weighted version of the S&P 500 Index, which is an unmanaged capitalization weighted index comprised of 500 common stocks on a statistical basis.

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.

Annual operating expenses for this ETF are 0.20%, making it one of the cheaper products in the space.

It has a 12-month trailing dividend yield of 1.28%.

Sector Exposure and Top Holdings

Most ETFs are very transparent products, and disclose their holdings on a daily basis. ETFs also offer diversified exposure, which minimizes single stock risk, though it's still important for investors to research a fund's holdings.

For RSP, it has heaviest allocation in the Information Technology sector --about 15% of the portfolio --while Industrials and Financials round out the top three.

When you look at individual holdings, Tesla Inc (TSLA - Free Report) accounts for about 0.30% of the fund's total assets, followed by Enphase Energy Inc (ENPH - Free Report) and Marathon Oil Corp (MRO - Free Report) .

The top 10 holdings account for about 2.74% of total assets under management.

Performance and Risk

The ETF return is roughly 29.89% and was up about 39.38% so far this year and in the past one year (as of 11/15/2021), respectively. RSP has traded between $120.74 and $161.65 during this last 52-week period.

The fund has a beta of 1.10 and standard deviation of 24.54% for the trailing three-year period. With about 507 holdings, it effectively diversifies company-specific risk.

Alternatives

Invesco S&P 500 Equal Weight ETF is a reasonable option for investors seeking to outperform the Style Box - Large Cap Blend segment of the market. However, there are other ETFs in the space which investors could consider.

IShares Core S&P 500 ETF (IVV - Free Report) tracks S&P 500 Index and the SPDR S&P 500 ETF (SPY - Free Report) tracks S&P 500 Index. IShares Core S&P 500 ETF has $323.93 billion in assets, SPDR S&P 500 ETF has $427.36 billion. IVV has an expense ratio of 0.03% and SPY charges 0.09%.

Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box - Large Cap Blend.

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.

Published in