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

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Launched on 11/01/2006, the Invesco S&P 500 Equal Weight Utilities ETF is a smart beta exchange traded fund offering broad exposure to the Utilities/Infrastructure ETFs category of the market.

What Are Smart Beta ETFs?

Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.

Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.

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.

Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.

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

RYU is managed by Invesco, and this fund has amassed over $392.06 million, which makes it one of the average sized ETFs in the Utilities/Infrastructure ETFs. This particular fund seeks to match the performance of the S&P 500 Equal Weight Telecommunication Services & Utilities Index before fees and expenses.

The S&P 500 Equal Weight Telecommunication Services & Utilities Index equally weights stocks found in the utilities and telecommunication services sectors 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 this ETF are 0.40%, making it on par with most peer products in the space.

RYU's 12-month trailing dividend yield is 2.44%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.

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

Taking into account individual holdings, Constellation Energy Corp (CEG - Free Report) accounts for about 4.31% of the fund's total assets, followed by Aes Corp/the (AES - Free Report) and Nextera Energy Inc (NEE - Free Report) .

The top 10 holdings account for about 36.39% of total assets under management.

Performance and Risk

The ETF has lost about -0.65% so far this year and it's up approximately 6.01% in the last one year (as of 11/04/2022). In the past 52-week period, it has traded between $101.43 and $127.40.

The ETF has a beta of 0.52 and standard deviation of 26.61% for the trailing three-year period, making it a medium risk choice in the space. With about 30 holdings, it has more concentrated exposure than peers.

Alternatives

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

Vanguard Utilities ETF (VPU - Free Report) tracks MSCI US Investable Market Utilities 25/50 Index and the Utilities Select Sector SPDR ETF (XLU - Free Report) tracks Utilities Select Sector Index. Vanguard Utilities ETF has $5.48 billion in assets, Utilities Select Sector SPDR ETF has $15.45 billion. VPU has an expense ratio of 0.10% and XLU 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 Utilities/Infrastructure 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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