Is Invesco S&P 500 Equal Weight Financials ETF (RYF) a Strong ETF Right Now?

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The Invesco S&P 500 Equal Weight Financials ETF (RYF) made its debut on 11/01/2006, and is a smart beta exchange traded fund that provides broad exposure to the Financials ETFs category of the market.

What Are Smart Beta ETFs?

The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the market or a particular market segment.

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.

If you’re the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking non-cap weighted strategies.

Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other such characteristics.

This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.

Fund Sponsor & Index

The fund is managed by Invesco, and has been able to amass over $422.68 million, which makes it one of the average sized ETFs in the Financials ETFs. RYF, before fees and expenses, seeks to match the performance of the S&P 500 Equal Weight Financials Index.

The S&P 500 Equal Weight Financials Index equally weights stocks in the financial sector of the S&P 500 Index.

Cost & Other Expenses

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 cousins, other things remaining the same.

With on par with most peer products in the space, this ETF has annual operating expenses of 0.40%.

It has a 12-month trailing dividend yield of 1.89%.

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 Financials sector.

Looking at individual holdings, First Republic Bank/ca (FRC) accounts for about 1.57% of total assets, followed by Allstate Corp/the (ALL) and Globe Life Inc (GL).

The top 10 holdings account for about 15.38% of total assets under management.

Performance and Risk

The ETF has added about 3.37% and is down about -10.48% so far this year and in the past one year (as of 01/19/2023), respectively. RYF has traded between $51.22 and $67.46 during this last 52-week period.

RYF has a beta of 1.08 and standard deviation of 32.82% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 68 holdings, it effectively diversifies company-specific risk.

Alternatives

Invesco S&P 500 Equal Weight Financials ETF is an excellent option for investors seeking to outperform the Financials ETFs segment of the market. There are other ETFs in the space which investors could consider as well.

Vanguard Financials ETF (VFH) tracks MSCI US Investable Market Financials 25/50 Index and the Financial Select Sector SPDR ETF (XLF) tracks Financial Select Sector Index. Vanguard Financials ETF has $9.04 billion in assets, Financial Select Sector SPDR ETF has $32.73 billion. VFH has an expense ratio of 0.10% and XLF charges 0.10%.

Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Financials 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 Financials ETF (RYF): ETF Research Reports

The Allstate Corporation (ALL) : Free Stock Analysis Report

First Republic Bank (FRC) : Free Stock Analysis Report

Financial Select Sector SPDR ETF (XLF): ETF Research Reports

Vanguard Financials ETF (VFH): ETF Research Reports

Globe Life Inc. (GL) : Free Stock Analysis Report

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