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Launched on 04/24/2003, the Invesco S&P 500 Equal Weight ETF (RSP) is a smart beta exchange traded fund offering broad exposure to the Style Box - Large Cap Blend category of the market.
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.
Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.
On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.
This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix of such characteristics.
The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.
Fund Sponsor & Index
Managed by Invesco, RSP has amassed assets over $35.59 billion, making it one of the largest ETFs in the Style Box - Large Cap Blend. RSP, before fees and expenses, seeks to match the performance of the S&P 500 Equal Weight Index.
The S&P 500 Equal Weight Index equally weights the stocks in 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 0.20% for this ETF, which makes it on par with most peer products in the space.
The fund has a 12-month trailing dividend yield of 1.76%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
This ETF has heaviest allocation in the Industrials sector - about 15.20% of the portfolio. Information Technology and Financials round out the top three.
When you look at individual holdings, Nvidia Corp (NVDA) accounts for about 0.24% of the fund's total assets, followed by Intel Corp (INTC) and Mccormick & Co Inc/md (MKC).