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Should You Invest in the Invesco Dynamic Software ETF (PSJ)?

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Launched on 06/23/2005, the Invesco Dynamic Software ETF (PSJ) is a passively managed exchange traded fund designed to provide a broad exposure to the Technology - Software segment of the equity market.

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.

Investor-friendly, sector ETFs provide many options to gain low risk and diversified exposure to a broad group of companies in particular sectors. Technology - Software is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 11, placing it in bottom 31%.

Index Details

The fund is sponsored by Invesco. It has amassed assets over $507.08 million, making it one of the average sized ETFs attempting to match the performance of the Technology - Software segment of the equity market. PSJ seeks to match the performance of the Dynamic Software Intellidex Index before fees and expenses.

The index is comprised of stocks of software companies. The Index is designed to provide capital appreciation by thoroughly evaluating companies based on a variety of investment merit criteria, including fundamental growth, stock valuation, investment timeliness and risk factors.

Costs

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.

Annual operating expenses for this ETF are 0.56%, making it on par with most peer products in the space.

Sector Exposure and Top Holdings

While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation in the Information Technology sector--about 58.80% of the portfolio. Telecom and Healthcare round out the top three.

Looking at individual holdings, Roku Inc (ROKU) accounts for about 5.81% of total assets, followed by Hubspot Inc (HUBS) and Microsoft Corp (MSFT).

The top 10 holdings account for about 46.19% of total assets under management.

Performance and Risk

The ETF has added about 0.53% and is up roughly 28.19% so far this year and in the past one year (as of 09/20/2021), respectively. PSJ has traded between $118.20 and $185.30 during this last 52-week period.

The ETF has a beta of 0.97 and standard deviation of 29.03% for the trailing three-year period, making it a high risk choice in the space. With about 31 holdings, it has more concentrated exposure than peers.

Alternatives

Invesco Dynamic Software 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, PSJ is a good option for those seeking exposure to the Technology ETFs area of the market. Investors might also want to consider some other ETF options in the space.

SPDR S&P Software & Services ETF (XSW) tracks S&P Software & Services Select Industry Index and the iShares Expanded TechSoftware Sector ETF (IGV) tracks S&P North American Technology-Software Index. SPDR S&P Software & Services ETF has $593.62 million in assets, iShares Expanded TechSoftware Sector ETF has $5.73 billion. XSW has an expense ratio of 0.35% and IGV charges 0.43%.

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 Dynamic Software ETF (PSJ): ETF Research Reports
 
Microsoft Corporation (MSFT) : Free Stock Analysis Report
 
HubSpot, Inc. (HUBS) : Free Stock Analysis Report
 
SPDR S&P Software & Services ETF (XSW): ETF Research Reports
 
iShares Expanded TechSoftware Sector ETF (IGV): ETF Research Reports
 
Roku, Inc. (ROKU) : Free Stock Analysis Report
 
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