Is Invesco S&P 500 Equal Weight Materials ETF (RSPM) a Strong ETF Right Now?
Designed to provide broad exposure to the Materials ETFs category of the market, the Invesco S&P 500 Equal Weight Materials ETF (RSPM) is a smart beta exchange traded fund launched on 11/01/2006.
What Are Smart Beta ETFs?
For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.
By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.
While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.
Fund Sponsor & Index
Because the fund has amassed over $279.18 million, this makes it one of the average sized ETFs in the Materials ETFs. RSPM is managed by Invesco. RSPM seeks to match the performance of the S&P 500 EQUAL WEIGHT MATERIALS INDEX before fees and expenses.
The S&P 500 Equal Weight Materials Index equally weights stocks in the materials sector of the S&P 500 Index.
Cost & Other Expenses
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive cousins if all other fundamentals are the same.
Operating expenses on an annual basis are 0.40% for RSPM, making it one of the cheaper products in the space.
The fund has a 12-month trailing dividend yield of 1.92%.
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.
Representing 100% of the portfolio, the fund has heaviest allocation to the Materials sector.
Looking at individual holdings, International Paper Co (IP) accounts for about 4.51% of total assets, followed by Newmont Corp (NEM) and International Flavors & Fragrances Inc (IFF).
Its top 10 holdings account for approximately 40.81% of RSPM's total assets under management.
Performance and Risk
The ETF return is roughly 5.75% and is up about 8.70% so far this year and in the past one year (as of 07/24/2024), respectively. RSPM has traded between $28.92 and $36.50 during this last 52-week period.
The ETF has a beta of 1.10 and standard deviation of 20.01% for the trailing three-year period. With about 29 holdings, it has more concentrated exposure than peers.
Alternatives
Invesco S&P 500 Equal Weight Materials ETF is a reasonable option for investors seeking to outperform the Materials ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
Materials Select Sector SPDR ETF (XLB) tracks Materials Select Sector Index and the FlexShares Morningstar Global Upstream Natural Resources ETF (GUNR) tracks Morningstar Global Upstream Natural Resources Index. Materials Select Sector SPDR ETF has $5.64 billion in assets, FlexShares Morningstar Global Upstream Natural Resources ETF has $5.77 billion. XLB has an expense ratio of 0.09% and GUNR charges 0.46%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Materials ETFs.
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 Materials ETF (RSPM): ETF Research Reports
International Paper Company (IP) : Free Stock Analysis Report
International Flavors & Fragrances Inc. (IFF) : Free Stock Analysis Report
Newmont Corporation (NEM) : Free Stock Analysis Report
Materials Select Sector SPDR ETF (XLB): ETF Research Reports
FlexShares Morningstar Global Upstream Natural Resources ETF (GUNR): ETF Research Reports