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

Sweta Killa

The Invesco S&P 500 Equal Weight Energy ETF (RYE) was launched on 11/01/2006, and is a passively managed exchange traded fund designed to offer broad exposure to the Energy - 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 also provide investors access to a broad group of companies in particular sectors that offer low risk and diversified exposure. Energy - Broad is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 15, placing it in bottom 6%.

Index Details

The fund is sponsored by Invesco. It has amassed assets over $201.65 M, making it one of the average sized ETFs attempting to match the performance of the Energy - Broad segment of the equity market. RYE seeks to match the performance of the S&P 500 Equal Weight Energy Index before fees and expenses.

The S&P 500 Equal Weight Energy Index is an unmanaged equal weighted version of the S&P 500 Energy Index that consists of the common stocks of the following industries: oil and gas exploration, production, marketing, refining and/or transportation and energy equipment and services industries that comprise the Energy sector of the S&P 500 Index.

Costs

Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain 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 1.93%.

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 Energy sector--about 100% of the portfolio.

Looking at individual holdings, Newfield Exploration Co (NFX) accounts for about 3.62% of total assets, followed by Valero Energy Corp (VLO) and Diamondback Energy Inc (FANG).

The top 10 holdings account for about 35.25% of total assets under management.

Performance and Risk

The ETF return is roughly 12.63% so far this year and is down about -19.97% in the last one year (as of 01/17/2019). In that past 52-week period, it has traded between $40.29 and $64.61.

The ETF has a beta of 1.24 and standard deviation of 26.06% 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 S&P 500 Equal Weight Energy ETF sports a Zacks ETF Rank of 4 (Sell), which is based on expected asset class return, expense ratio, and momentum, among other factors. RYE, then, is not the best option for investors seeking exposure to the Energy ETFs segment of the market. However, there are better ETFs in the space to consider.

Vanguard Energy ETF (VDE) tracks MSCI US Investable Market Energy 25/50 Index and the Energy Select Sector SPDR Fund (XLE) tracks Energy Select Sector Index. Vanguard Energy ETF has $3.45 B in assets, Energy Select Sector SPDR Fund has $13.87 B. VDE has an expense ratio of 0.10% and XLE 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 Energy ETF (RYE): ETF Research Reports
 
Energy Select Sector SPDR Fund (XLE): ETF Research Reports
 
Vanguard Energy ETF (VDE): ETF Research Reports
 
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