Is Invesco S&P 500 Equal Weight Financials ETF (RYF) a Strong ETF Right Now?
Launched on 11/01/2006, the Invesco S&P 500 Equal Weight Financials ETF (RYF) is a smart beta exchange traded fund offering broad exposure to the Financials ETFs category of the market.
What Are Smart Beta ETFs?
The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.
A good option for investors who believe in market efficiency, market cap weighted indexes offer 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.
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.
This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.
Fund Sponsor & Index
Because the fund has amassed over $428.62 million, this makes it one of the average sized ETFs in the Financials ETFs. RYF is managed by Invesco. RYF, before fees and expenses, seeks to match the performance of the S&P 500 Equal Weight Financials Index.
The S&P 500 Equal Weight Financials Index equally weights stocks in the financial sector of the S&P 500 Index.
Cost & Other Expenses
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive cousins if all other fundamentals are the same.
Operating expenses on an annual basis are 0.40% for RYF, making it on par with most peer products in the space.
It's 12-month trailing dividend yield comes in at 1.91%.
Sector Exposure and Top Holdings
ETFs offer 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.
Representing 100% of the portfolio, the fund has heaviest allocation to the Financials sector.
Taking into account individual holdings, Nasdaq Inc (NDAQ) accounts for about 1.74% of the fund's total assets, followed by Arthur J Gallagher & Co (AJG) and Factset Research Systems Inc (FDS).
RYF's top 10 holdings account for about 16.85% of its total assets under management.
Performance and Risk
Year-to-date, the Invesco S&P 500 Equal Weight Financials ETF has lost about -9.16% so far, and is down about -10.75% over the last 12 months (as of 11/17/2022). RYF has traded between $51.22 and $67.90 in this past 52-week period.
RYF has a beta of 1.09 and standard deviation of 32.68% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 67 holdings, it effectively diversifies company-specific risk.
Alternatives
Invesco S&P 500 Equal Weight Financials ETF is an excellent option for investors seeking to outperform the Financials ETFs segment of the market. There are other ETFs in the space which investors could consider as well.
Vanguard Financials ETF (VFH) tracks MSCI US Investable Market Financials 25/50 Index and the Financial Select Sector SPDR ETF (XLF) tracks Financial Select Sector Index. Vanguard Financials ETF has $9.11 billion in assets, Financial Select Sector SPDR ETF has $32.47 billion. VFH has an expense ratio of 0.10% and XLF charges 0.10%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Financials 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 Financials ETF (RYF): ETF Research Reports
Nasdaq, Inc. (NDAQ) : Free Stock Analysis Report
FactSet Research Systems Inc. (FDS) : Free Stock Analysis Report
Arthur J. Gallagher & Co. (AJG) : Free Stock Analysis Report
Financial Select Sector SPDR ETF (XLF): ETF Research Reports
Vanguard Financials ETF (VFH): ETF Research Reports
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