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

Zacks Equity Research

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

An increasingly popular option among retail and institutional investors, passively managed ETFs offer low costs, transparency, flexibility, and tax efficiency; they are also excellent vehicles for long term investors.

Sector ETFs also provide investors access to a broad group of companies in particular sectors that offer low risk and diversified exposure. Technology - Software is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 7, placing it in top 44%.

Index Details

The fund is sponsored by Invesco. It has amassed assets over $479.25 M, 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

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 0.58%, making it on par with most peer products in the space.

Sector Exposure and Top Holdings

It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. 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 90% of the portfolio. Healthcare and Industrials round out the top three.

Looking at individual holdings, Vmware Inc (VMW) accounts for about 6.10% of total assets, followed by Oracle Corp (ORCL) and Microsoft Corp (MSFT).

The top 10 holdings account for about 46.10% of total assets under management.

Performance and Risk

The ETF has added about 29.70% so far this year and is up about 27.49% in the last one year (as of 11/07/2019). In that past 52-week period, it has traded between $68.31 and $104.07.

The ETF has a beta of 1.13 and standard deviation of 21.16% for the trailing three-year period, making it a high risk choice in the space. With about 30 holdings, it has more concentrated exposure than peers.

Alternatives

Invesco Dynamic Software ETF holds a Zacks ETF Rank of 1 (Strong Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, PSJ is an excellent option for investors seeking exposure to the Technology ETFs segment of the market. There are other additional ETFs in the space that investors could consider as well.

SPDR S&P Software & Services ETF (XSW) tracks S&P Software & Services Select Industry Index and the iShares Expanded Tech-Software Sector ETF (IGV) tracks S&P North American Technology-Software Index. SPDR S&P Software & Services ETF has $215.31 M in assets, iShares Expanded Tech-Software Sector ETF has $2.79 B. XSW has an expense ratio of 0.35% and IGV charges 0.46%.

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.

Click to get this free report Invesco Dynamic Software ETF (PSJ): ETF Research Reports Microsoft Corporation (MSFT) : Free Stock Analysis Report Oracle Corporation (ORCL) : Free Stock Analysis Report VMware, Inc. (VMW) : Free Stock Analysis Report iShares Expanded Tech-Software Sector ETF (IGV): ETF Research Reports SPDR S&P Software & Services ETF (XSW): ETF Research Reports To read this article on Zacks.com click here. Zacks Investment Research