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Is Invesco Defensive Equity ETF (DEF) a Strong ETF Right Now?
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Making its debut on 12/15/2006, smart beta exchange traded fund Invesco Defensive Equity ETF provides investors broad exposure to the Style Box - Large Cap Growth category of the market.
What Are Smart Beta ETFs?
Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.
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.
Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.
Fund Sponsor & Index
The fund is managed by Invesco, and has been able to amass over $221.34 million, which makes it one of the average sized ETFs in the Style Box - Large Cap Growth. Before fees and expenses, DEF seeks to match the performance of the Guggenheim Defensive Equity Index.
The Invesco Defensive Equity Index is designed to provide exposure to securities of large-cap US issuers.
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.
Operating expenses on an annual basis are 0.54% for DEF, making it on par with most peer products in the space.
DEF's 12-month trailing dividend yield is 1.42%.
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.
This ETF has heaviest allocation in the Financials sector - about 19% of the portfolio. Industrials and Healthcare round out the top three.
Taking into account individual holdings, Juniper Networks Inc (JNPR - Free Report) accounts for about 1.10% of the fund's total assets, followed by Cboe Global Markets Inc (CBOE - Free Report) and Kimberly-Clark Corp (KMB - Free Report) .
Its top 10 holdings account for approximately 10.79% of DEF's total assets under management.
Performance and Risk
Year-to-date, the Invesco Defensive Equity ETF return is roughly 3.98% so far, and was up about 8.97% over the last 12 months (as of 07/12/2023). DEF has traded between $60.13 and $70.48 in this past 52-week period.
The fund has a beta of 0.85 and standard deviation of 14.82% for the trailing three-year period, which makes DEF a medium risk choice in this particular space. With about 102 holdings, it effectively diversifies company-specific risk.
Alternatives
Invesco Defensive Equity ETF is a reasonable option for investors seeking to outperform the Style Box - Large Cap Growth segment of the market. However, there are other ETFs in the space which investors could consider.
Vanguard Growth ETF (VUG - Free Report) tracks CRSP U.S. Large Cap Growth Index and the Invesco QQQ (QQQ - Free Report) tracks NASDAQ-100 Index. Vanguard Growth ETF has $92.22 billion in assets, Invesco QQQ has $201.90 billion. VUG has an expense ratio of 0.04% and QQQ charges 0.20%.
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 Growth.
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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Is Invesco Defensive Equity ETF (DEF) a Strong ETF Right Now?
Making its debut on 12/15/2006, smart beta exchange traded fund Invesco Defensive Equity ETF provides investors broad exposure to the Style Box - Large Cap Growth category of the market.
What Are Smart Beta ETFs?
Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.
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.
Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.
Fund Sponsor & Index
The fund is managed by Invesco, and has been able to amass over $221.34 million, which makes it one of the average sized ETFs in the Style Box - Large Cap Growth. Before fees and expenses, DEF seeks to match the performance of the Guggenheim Defensive Equity Index.
The Invesco Defensive Equity Index is designed to provide exposure to securities of large-cap US issuers.
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.
Operating expenses on an annual basis are 0.54% for DEF, making it on par with most peer products in the space.
DEF's 12-month trailing dividend yield is 1.42%.
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.
This ETF has heaviest allocation in the Financials sector - about 19% of the portfolio. Industrials and Healthcare round out the top three.
Taking into account individual holdings, Juniper Networks Inc (JNPR - Free Report) accounts for about 1.10% of the fund's total assets, followed by Cboe Global Markets Inc (CBOE - Free Report) and Kimberly-Clark Corp (KMB - Free Report) .
Its top 10 holdings account for approximately 10.79% of DEF's total assets under management.
Performance and Risk
Year-to-date, the Invesco Defensive Equity ETF return is roughly 3.98% so far, and was up about 8.97% over the last 12 months (as of 07/12/2023). DEF has traded between $60.13 and $70.48 in this past 52-week period.
The fund has a beta of 0.85 and standard deviation of 14.82% for the trailing three-year period, which makes DEF a medium risk choice in this particular space. With about 102 holdings, it effectively diversifies company-specific risk.
Alternatives
Invesco Defensive Equity ETF is a reasonable option for investors seeking to outperform the Style Box - Large Cap Growth segment of the market. However, there are other ETFs in the space which investors could consider.
Vanguard Growth ETF (VUG - Free Report) tracks CRSP U.S. Large Cap Growth Index and the Invesco QQQ (QQQ - Free Report) tracks NASDAQ-100 Index. Vanguard Growth ETF has $92.22 billion in assets, Invesco QQQ has $201.90 billion. VUG has an expense ratio of 0.04% and QQQ charges 0.20%.
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 Growth.
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.