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

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Designed to provide broad exposure to the Financials ETFs category of the market, the Invesco S&P 500 Equal Weight Financials ETF (RYF - Free Report) is a smart beta exchange traded fund launched on 11/01/2006.

What Are Smart Beta ETFs?

For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.

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.

On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.

These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of such characteristics.

This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.

Fund Sponsor & Index

The fund is sponsored by Invesco. It has amassed assets over $496.94 million, making it one of the average sized ETFs in the Financials ETFs. RYF, before fees and expenses, 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

When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.

Annual operating expenses for RYF are 0.40%, which makes it on par with most peer products in the space.

It's 12-month trailing dividend yield comes in at 1.56%.

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.

Representing 100% of the portfolio, the fund has heaviest allocation to the Financials sector.

Looking at individual holdings, Regions Financial Corp (RF - Free Report) accounts for about 1.75% of total assets, followed by Svb Financial Group (SIVB - Free Report) and Bank Of America Corp (BAC - Free Report) .

Its top 10 holdings account for approximately 16.93% of RYF's total assets under management.

Performance and Risk

So far this year, RYF has added about 0%, and was up about 36.17% in the last one year (as of 01/03/2022). During this past 52-week period, the fund has traded between $47.31 and $66.59.

The ETF has a beta of 1.20 and standard deviation of 30.76% for the trailing three-year period, making it a medium risk choice in the space. With about 66 holdings, it effectively diversifies company-specific risk.

Alternatives

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

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 $11.60 billion in assets, Financial Select Sector SPDR ETF has $44.33 billion. VFH has an expense ratio of 0.10% and XLF 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 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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