Launched on March 3, 2005, the Invesco S&P SmallCap Momentum ETF (XSMO Quick QuoteXSMO - Free Report) is a passively managed exchange traded fund designed to provide a broad exposure to the Small Cap Growth segment of the US equity market.

The fund is sponsored by Invesco. It has amassed assets over $2.00 billion, making it one of the larger ETFs attempting to match the Small Cap Growth segment of the US equity market.

Why Small Cap Growth

Small cap companies have market capitalization below $2 billion. They usually have higher potential than large and mid cap companies with stocks but higher risk.

While growth stocks do boast higher than average sales and earnings growth rates, and they are expected to grow faster than the wider market, investors should note these kinds of stocks have higher valuations. Something to keep in mind is the higher level of volatility that is affiliated with growth stocks. Even though growth stocks are more likely to outperform their value counterparts in strong bull markets, value stocks have a record of delivering better returns in almost all markets than growth stocks.

Costs

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 counterparts, other things remaining the same.

Annual operating expenses for this ETF are 0.36%, putting it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 0.83%.

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 to the Industrials sector -- about 18.9% of the portfolio. Financials and Consumer Discretionary round out the top three.

Looking at individual holdings, Mr Cooper Group Inc (COOP) accounts for about 3.22% of total assets, followed by Brinker International Inc (EAT) and Corcept Therapeutics Inc (CORT).

The top 10 holdings account for about 22.49% 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 return is roughly 9.47% so far this year and it's up approximately 10.92% in the last one year (as of 11/04/2025). In the past 52-week period, it has traded between $55.15 and $74.29.

The ETF has a beta of 1.07 and standard deviation of 21.02% for the trailing three-year period. With about 118 holdings, it effectively diversifies company-specific risk.

Alternatives

Invesco S&P SmallCap Momentum ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, XSMO is a reasonable option for those seeking exposure to the Style Box - Small Cap Growth area of the market. Investors might also want to consider some other ETF options in the space.

The iShares Russell 2000 Growth ETF (IWO) and the Vanguard Small-Cap Growth ETF (VBK) track a similar index. While iShares Russell 2000 Growth ETF has $13.17 billion in assets, Vanguard Small-Cap Growth ETF has $20.67 billion. IWO has an expense ratio of 0.24% and VBK charges 0.07%.

Bottom-Line

Retail and institutional investors increasingly turn to passively managed ETFs because they offer low costs, transparency, flexibility, and tax efficiency; these kind of funds are also 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.