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Designed to provide broad exposure to the Technology ETFs category of the market, the Invesco S&P 500 Equal Weight Technology ETF (RYT) is a smart beta exchange traded fund launched on 11/01/2006.
What Are Smart Beta ETFs?
The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.
Market cap weighted indexes work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.
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.
These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of such characteristics.
Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.
Fund Sponsor & Index
The fund is managed by Invesco, and has been able to amass over $2.03 billion, which makes it one of the larger ETFs in the Technology ETFs. RYT, before fees and expenses, seeks to match the performance of the S&P 500 Equal Weight Information Technology Index.
The S&P 500 Equal Weight Information Technology Index equally weights stocks in the information technology sector of the S&P 500 Index.
Cost & Other Expenses
For ETF investors, expense ratios are an important factor when considering a fund's return; in the long-term, cheaper funds actually have the ability to outperform their more expensive cousins if all other things 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 0.63%.
Sector Exposure and Top Holdings
ETFs offer 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.
RYT's heaviest allocation is in the Information Technology sector, which is about 100% of the portfolio.
When you look at individual holdings, Intuit Inc (INTU) accounts for about 1.44% of the fund's total assets, followed by Epam Systems Inc (EPAM) and Servicenow Inc (NOW).