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Should You Invest in the Invesco Dynamic Software ETF (PSJ)?

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The Invesco Dynamic Software ETF (PSJ - Free Report) was launched on 06/23/2005, and is a passively managed exchange traded fund designed to offer broad exposure to the Technology - Software 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.

Investor-friendly, sector ETFs provide many options to gain low risk and diversified exposure to a broad group of companies in particular sectors. Technology - Software 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 $211.96 million, making it one of the average sized ETFs attempting to match the performance of the Technology - Software segment of the equity market. PSJ seeks to match the performance of the Dynamic Software Intellidex Index before fees and expenses.

The Dynamic Software Intellidex Index is comprised of stocks of software companies. The Index is designed to provide capital appreciation by thoroughly evaluating companies based on a variety of investment merit criteria, including fundamental growth, stock valuation, investment timeliness and risk factors.

Costs

Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.

Annual operating expenses for this ETF are 0.56%, making it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 8.68%.

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.

Looking at individual holdings, Cadence Design Systems Inc (CDNS - Free Report) accounts for about 5.85% of total assets, followed by Synopsys Inc (SNPS - Free Report) and Ss&c Technologies Holdings Inc (SSNC - Free Report) .

The top 10 holdings account for about 47.25% of total assets under management.

Performance and Risk

The ETF has lost about -27.71% so far this year and is down about -38.07% in the last one year (as of 06/22/2022). In that past 52-week period, it has traded between $86.93 and $167.59.

The ETF has a beta of 1.03 and standard deviation of 30.71% for the trailing three-year period, making it a high risk choice in the space. With about 30 holdings, it has more concentrated exposure than peers.

Alternatives

Invesco Dynamic Software 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, PSJ is an outstanding option for investors seeking exposure to the Technology ETFs segment of the market. There are other additional ETFs in the space that investors could consider as well.

SPDR S&P Software & Services ETF (XSW - Free Report) tracks S&P Software & Services Select Industry Index and the iShares Expanded TechSoftware Sector ETF (IGV - Free Report) tracks S&P North American Technology-Software Index. SPDR S&P Software & Services ETF has $208.62 million in assets, iShares Expanded TechSoftware Sector ETF has $4.23 billion. XSW has an expense ratio of 0.35% and IGV charges 0.43%.

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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