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Is Invesco 130 Laddered Treasury ETF (PLW) a Strong ETF Right Now?

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Making its debut on 10/11/2007, smart beta exchange traded fund Invesco 130 Laddered Treasury ETF (PLW) provides investors broad exposure to the Government Bond ETFs category of the market.

What Are Smart Beta ETFs?

The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the market or a particular market segment.

Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.

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.

Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other such characteristics.

Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.

Fund Sponsor & Index

Because the fund has amassed over $415.86 million, this makes it one of the average sized ETFs in the Government Bond ETFs. PLW is managed by Invesco. Before fees and expenses, this particular fund seeks to match the performance of the Ryan/NASDAQ U.S. 1-30 Year Treasury Laddered Index.

The Ryan/NASDAQ U.S. 1-30 Year Treasury Laddered Index measures the potential returns of the U.S. Treasury yield curve based on approximately 30 equally weighted U.S. Treasury issues with fixed coupons, scheduled to mature in a proportional, annual sequential structure.

Cost & Other Expenses

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.

Operating expenses on an annual basis are 0.25% for PLW, making it one of the most expensive products in the space.

PLW's 12-month trailing dividend yield is 0.92%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.

Looking at individual holdings, United States Treasury Note/bond-4.50%-02-15-2036 (912810FT0) accounts for about 10% of total assets, followed by United States Treasury Note/bond-5.38%-02-15-2031 (912810FP8) and United States Treasury Note/bond-1.88%-02-15-2051 (912810SU3).

Its top 10 holdings account for approximately 46.94% of PLW's total assets under management.

Performance and Risk

The ETF has lost about -2.70% and is down about -4.55% so far this year and in the past one year (as of 08/17/2021), respectively. PLW has traded between $34.96 and $39.69 during this last 52-week period.

The ETF has a beta of -0.17 and standard deviation of 9.31% for the trailing three-year period, making it a high risk choice in the space. With about 28 holdings, it has more concentrated exposure than peers.

Alternatives

Invesco 130 Laddered Treasury ETF is a reasonable option for investors seeking to outperform the Government Bond ETFs segment of the market. However, there are other ETFs in the space which investors could consider.

SPDR Portfolio Long Term Treasury ETF (SPTL) tracks Bloomberg Barclays Long U.S. Treasury Index and the iShares 20 Year Treasury Bond ETF (TLT) tracks ICE U.S. Treasury 20+ Year Bond Index. SPDR Portfolio Long Term Treasury ETF has $4.16 billion in assets, iShares 20 Year Treasury Bond ETF has $16.92 billion. SPTL has an expense ratio of 0.06% and TLT charges 0.15%.

Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Government Bond 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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Invesco 130 Laddered Treasury ETF (PLW): ETF Research Reports
 
iShares 20 Year Treasury Bond ETF (TLT): ETF Research Reports
 
SPDR Portfolio Long Term Treasury ETF (SPTL): ETF Research Reports
 
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