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

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Launched on 11/01/2006, the Invesco S&P 500 Equal Weight Financials ETF (RYF - Free Report) is a smart beta exchange traded fund offering broad exposure to the Financials 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.

But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.

Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other such characteristics.

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 sponsored by Invesco. It has amassed assets over $458.24 million, making it one of the average sized ETFs in the Financials ETFs. This particular fund seeks to match the performance of the S&P 500 Equal Weight Financials Index before fees and expenses.

The S&P 500 Equal Weight Financials Index equally weights stocks in the financial sector of the S&P 500 Index.

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 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 1.83%.

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.

RYF's heaviest allocation is in the Financials sector, which is about 100% of the portfolio.

Taking into account individual holdings, Allstate Corp/the (ALL - Free Report) accounts for about 1.83% of the fund's total assets, followed by M&t Bank Corp (MTB - Free Report) and People's United Financial Inc .

RYF's top 10 holdings account for about 17.36% of its total assets under management.

Performance and Risk

So far this year, RYF has lost about -14.35%, and is down about -7.76% in the last one year (as of 05/12/2022). During this past 52-week period, the fund has traded between $55.21 and $67.90.

RYF has a beta of 1.14 and standard deviation of 31.59% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 69 holdings, it effectively diversifies company-specific risk.

Alternatives

Invesco S&P 500 Equal Weight Financials ETF is an excellent option for investors seeking to outperform the Financials ETFs segment of the market. There are other ETFs in the space which investors could consider as well.

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 $10.18 billion in assets, Financial Select Sector SPDR ETF has $34.82 billion. VFH has an expense ratio of 0.10% and XLF charges 0.10%.

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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