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Launched on 03/03/2005, the Invesco S&P SmallCap Momentum ETF (XSMO) is a passively managed exchange traded fund designed to provide a broad exposure to the Small Cap Growth segment of the US equity market.
The fund is sponsored by Invesco. It has amassed assets over $1.38 billion, making it one of the larger ETFs attempting to match the Small Cap Growth segment of the US equity market.
Why Small Cap Growth
With more potential comes more risk, and small cap companies, with market capitalization below $2 billion, epitomizes this way of thinking.
Growth stocks have higher than average sales and earnings growth rates. While these are expected to grow faster than the broader market, they also have higher valuations. Further, growth stocks have a higher level of volatility associated with them. Compared to value stocks, growth stocks are a safer bet in a strong bull market, but don't perform as strongly in almost all other financial environments.
Costs
Expense ratios are an important factor in the return of an ETF and in the long term, cheaper funds can significantly outperform their more expensive counterparts, other things remaining the same.
Annual operating expenses for this ETF are 0.39%, putting it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 0.63%.
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 to the Industrials sector--about 28% of the portfolio. Financials and Consumer Discretionary round out the top three.
Looking at individual holdings, Carpenter Technology Corp (CRS) accounts for about 3.96% of total assets, followed by Jackson Financial Inc (JXN) and Spx Technologies Inc (SPXC).
The top 10 holdings account for about 24.02% of total assets under management.
Performance and Risk
XSMO seeks to match the performance of the S&P SMALLCAP 600 MOMENTUM INDEX before fees and expenses. The S&P Smallcap 600 Momentum Index is composed of securities with strong growth characteristics selected from the Russell 2000 Index.
The ETF has added roughly 17.65% so far this year and is up about 17.21% in the last one year (as of 12/24/2024). In the past 52-week period, it has traded between $54.33 and $73.72.
The ETF has a beta of 1.07 and standard deviation of 22.73% for the trailing three-year period. With about 115 holdings, it effectively diversifies company-specific risk.