If you're interested in broad exposure to the Small Cap Growth segment of the US equity market, look no further than the Invesco S&P SmallCap Momentum ETF (
XSMO Quick Quote XSMO - Free Report) , a passively managed exchange traded fund launched on 03/03/2005.
The fund is sponsored by Invesco. It has amassed assets over $215.57 million, making it one of the average sized ETFs attempting to match the Small Cap Growth segment of the US equity market.
Why Small Cap Growth
Sitting at a market capitalization below $2 billion, small cap companies tend to be high-potential stocks compared to its large and mid cap counterparts, but come with higher risk.
Qualities of growth stocks include faster growth rates compared to the broader market, as well as higher valuations and higher than average sales and earnings growth rates. Also, growth stocks are a type of equity that carries more risk compared to others. When you consider growth versus value, growth stocks are usually the clear winner in strong bull markets but tend to fall flat in nearly all other environments.
When considering an ETF's total return, expense ratios are an important factor, and cheaper funds can significantly outperform their more expensive counterparts in the long term if all other factors remain equal.
Annual operating expenses for this ETF are 0.37%, putting it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 1.27%.
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.
This ETF has heaviest allocation to the Industrials sector--about 25.70% of the portfolio. Information Technology and Energy round out the top three.
Looking at individual holdings, Elf Beauty Inc (
ELF Quick Quote ELF - Free Report) accounts for about 4.06% of total assets, followed by Ati Inc ( ATI Quick Quote ATI - Free Report) and Rambus Inc ( RMBS Quick Quote RMBS - Free Report) .
The top 10 holdings account for about 26.8% of total assets under management.
Performance and Risk
XSMO seeks to match the performance of the S&P SMALLCAP 600 MOMENTUM INDEX before fees and expenses. The S&P Smallcap 600 Momentum Index is composed of securities with strong growth characteristics selected from the Russell 2000 Index.
The ETF has added about 6.80% so far this year and is up about 10.03% in the last one year (as of 09/21/2023). In the past 52-week period, it has traded between $42.60 and $51.49.
The ETF has a beta of 1.08 and standard deviation of 24.60% for the trailing three-year period. With about 115 holdings, it effectively diversifies company-specific risk.
Invesco S&P SmallCap Momentum 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, XSMO is a great option for investors seeking exposure to the Style Box - Small Cap Growth segment of the market. There are other additional ETFs in the space that investors could consider as well.
The iShares Russell 2000 Growth ETF (
IWO Quick Quote IWO - Free Report) and the Vanguard Small-Cap Growth ETF ( VBK Quick Quote VBK - Free Report) track a similar index. While iShares Russell 2000 Growth ETF has $9.34 billion in assets, Vanguard Small-Cap Growth ETF has $13.61 billion. IWO has an expense ratio of 0.24% and VBK charges 0.07%. Bottom-Line
Passively managed ETFs are becoming increasingly popular with institutional as well as retail investors due to their low cost, transparency, flexibility and tax efficiency. They are excellent vehicles for long term investors.
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.