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The Invesco S&P 500 Equal Weight Materials ETF (RSPM) made its debut on 11/01/2006, and is a smart beta exchange traded fund that provides broad exposure to the Materials ETFs category of the market.
What Are Smart Beta ETFs?
Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.
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.
There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.
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.
Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.
Fund Sponsor & Index
Managed by Invesco, RSPM has amassed assets over $214.69 million, making it one of the average sized ETFs in the Materials ETFs. 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
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.
Operating expenses on an annual basis are 0.40% for RSPM, making it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 1.44%.
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.
RSPM's heaviest allocation is in the Materials sector, which is about 100% of the portfolio.
Looking at individual holdings, International Paper Co (IP) accounts for about 3.86% of total assets, followed by Smurfit Westrock Plc (SW) and Cf Industries Holdings Inc (CF).
RSPM's top 10 holdings account for about 37.02% of its total assets under management.