Is Invesco S&P 500 Equal Weight Materials ETF (RTM) a Strong ETF Right Now?
The Invesco S&P 500 Equal Weight Materials ETF (RTM) made its debut on 11/01/2006, and is a smart beta exchange traded fund that provides broad exposure to the Materials 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.
Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.
However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.
By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.
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
Because the fund has amassed over $359.71 million, this makes it one of the average sized ETFs in the Materials ETFs. RTM is managed by Invesco. Before fees and expenses, RTM seeks to match the performance of the S&P 500 Equal Weight Materials Index.
The S&P 500 Equal Weight Materials Index equally weights stocks in the materials sector of the S&P 500 Index.
Cost & Other Expenses
Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.
Operating expenses on an annual basis are 0.40% for RTM, making it on par with most peer products in the space.
It's 12-month trailing dividend yield comes in at 2.14%.
Sector Exposure and Top Holdings
Most ETFs are very transparent products, and disclose their holdings on a daily basis. ETFs also offer diversified exposure, which minimizes single stock risk, though it's still important for investors to research a fund's holdings.
For RTM, it has heaviest allocation in the Materials sector --about 100% of the portfolio.
Looking at individual holdings, Cf Industries Holdings Inc (CF) accounts for about 4.26% of total assets, followed by Avery Dennison Corp (AVY) and Nucor Corp (NUE).
Its top 10 holdings account for approximately 40.58% of RTM's total assets under management.
Performance and Risk
The ETF has lost about -16.29% and is down about -6.15% so far this year and in the past one year (as of 09/23/2022), respectively. RTM has traded between $146.88 and $190.46 during this last 52-week period.
RTM has a beta of 1.06 and standard deviation of 29.06% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 29 holdings, it has more concentrated exposure than peers.
Alternatives
Invesco S&P 500 Equal Weight Materials ETF is a reasonable option for investors seeking to outperform the Materials ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
Materials Select Sector SPDR ETF (XLB) tracks Materials Select Sector Index and the FlexShares Morningstar Global Upstream Natural Resources ETF (GUNR) tracks Morningstar Global Upstream Natural Resources Index. Materials Select Sector SPDR ETF has $4.93 billion in assets, FlexShares Morningstar Global Upstream Natural Resources ETF has $6.75 billion. XLB has an expense ratio of 0.10% and GUNR charges 0.46%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Materials 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 S&P 500 Equal Weight Materials ETF (RTM): ETF Research Reports
Nucor Corporation (NUE) : Free Stock Analysis Report
Avery Dennison Corporation (AVY) : Free Stock Analysis Report
CF Industries Holdings, Inc. (CF) : Free Stock Analysis Report
Materials Select Sector SPDR ETF (XLB): ETF Research Reports
FlexShares Morningstar Global Upstream Natural Resources ETF (GUNR): ETF Research Reports
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