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Should You Invest in the Invesco S&P 500 Equal Weight Consumer Discretionary ETF (RCD)?

·4 min read

Looking for broad exposure to the Consumer Discretionary - Broad segment of the equity market? You should consider the Invesco S&P 500 Equal Weight Consumer Discretionary ETF (RCD), a passively managed exchange traded fund launched on 11/01/2006.

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.

Sector ETFs are also funds of convenience, offering many ways to gain low risk and diversified exposure to a broad group of companies in particular sectors. Consumer Discretionary - Broad is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 9, placing it in bottom 44%.

Index Details

The fund is sponsored by Invesco. It has amassed assets over $921.19 million, making it one of the larger ETFs attempting to match the performance of the Consumer Discretionary - Broad segment of the equity market. RCD seeks to match the performance of the S&P 500 Equal Weight Consumer Discretionary Index before fees and expenses.

The S&P 500 Equal Weight Consumer Discretionary Index is an unmanaged equal weighted version of the S&P 500 Consumer Discretionary Index that consists of common stocks of companies that comprise the Consumer Discretionary Sector of the S&P 500 Index.

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 0.40%, making it one of the cheaper products in the space.

It has a 12-month trailing dividend yield of 0.40%.

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 Consumer Discretionary sector--about 100% of the portfolio.

Looking at individual holdings, Lennar Corp (LEN) accounts for about 1.78% of total assets, followed by Best Buy Co Inc (BBY) and Ebay Inc (EBAY).

The top 10 holdings account for about 17.21% of total assets under management.

Performance and Risk

The ETF has added about 22.53% and is up about 69.62% so far this year and in the past one year (as of 05/27/2021), respectively. RCD has traded between $85.01 and $151.95 during this last 52-week period.

The ETF has a beta of 1.44 and standard deviation of 29.11% for the trailing three-year period, making it a medium risk choice in the space. With about 65 holdings, it effectively diversifies company-specific risk.

Alternatives

Invesco S&P 500 Equal Weight Consumer Discretionary 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, RCD is a good option for those seeking exposure to the Consumer Discretionary ETFs area of the market. Investors might also want to consider some other ETF options in the space.

Vanguard Consumer Discretionary ETF (VCR) tracks MSCI US Investable Market Consumer Discretionary 25/50 Index and the Consumer Discretionary Select Sector SPDR ETF (XLY) tracks Consumer Discretionary Select Sector Index. Vanguard Consumer Discretionary ETF has $6.06 billion in assets, Consumer Discretionary Select Sector SPDR ETF has $19.76 billion. VCR has an expense ratio of 0.10% and XLY charges 0.12%.

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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INVS-SP5 EW C D (RCD): ETF Research Reports
 
Best Buy Co., Inc. (BBY) : Free Stock Analysis Report
 
eBay Inc. (EBAY) : Free Stock Analysis Report
 
Lennar Corporation (LEN) : Free Stock Analysis Report
 
VIPERS-CONS DIS (VCR): ETF Research Reports
 
SPDR-CONS DISCR (XLY): ETF Research Reports
 
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