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Should You Invest in the Invesco S&P 500 Equal Weight Financials ETF (RYF)?

Zacks Equity Research

The Invesco S&P 500 Equal Weight Financials ETF (RYF) was launched on 11/01/2006, and is a passively managed exchange traded fund designed to offer broad exposure to the Financials - Broad 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 are also funds of convenience, offering many ways to gain low risk and diversified exposure to a broad group of companies in particular sectors. Financials - Broad 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 $265.35 M, making it one of the average sized ETFs attempting to match the performance of the Financials - Broad segment of the equity market. RYF seeks to match the performance of the S&P 500 Equal Weight Financials Index before fees and expenses.

The S&P 500 Equal Weight Financials Index is an unmanaged equal weighted version of the S&P 500 Financials Index that consists of the common stocks of the following industries: banks, diversified financials, brokerage, asset manage-ment insurance and real estate, including investment trusts that comprise the Financials 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 on par with most peer products in the space.

It has a 12-month trailing dividend yield of 2.06%.

Sector Exposure and Top Holdings

ETFs offer a 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.

This ETF has heaviest allocation in the Financials sector--about 100% of the portfolio.

Looking at individual holdings, First Republic Bank/ca (FRC) accounts for about 1.67% of total assets, followed by Marketaxess Holdings Inc (MKTX) and State Street Corp (STT).

The top 10 holdings account for about 16% of total assets under management.

Performance and Risk

So far this year, RYF has added roughly 27.71%, and is up about 13.91% in the last one year (as of 11/18/2019). During this past 52-week period, the fund has traded between $34.13 and $45.82.

The ETF has a beta of 1.13 and standard deviation of 15.77% for the trailing three-year period, making it 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 carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, RYF is a sufficient option for those seeking exposure to the Financials ETFs area of the market. Investors might also want to consider some other ETF options in the space.

Vanguard Financials ETF (VFH) tracks MSCI US Investable Market Financials 25/50 Index and the Financial Select Sector SPDR Fund (XLF) tracks Financial Select Sector Index. Vanguard Financials ETF has $7.58 B in assets, Financial Select Sector SPDR Fund has $25.50 B. VFH has an expense ratio of 0.10% and XLF charges 0.13%.

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
 
State Street Corporation (STT) : Free Stock Analysis Report
 
First Republic Bank (FRC) : Free Stock Analysis Report
 
Financial Select Sector SPDR Fund (XLF): ETF Research Reports
 
Vanguard Financials ETF (VFH): ETF Research Reports
 
MarketAxess Holdings Inc. (MKTX) : Free Stock Analysis Report
 
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