Is Invesco S&P 500 Equal Weight Industrials ETF (RGI) a Strong ETF Right Now?
A smart beta exchange traded fund, the Invesco S&P 500 Equal Weight Industrials ETF (RGI) debuted on 11/01/2006, and offers broad exposure to the Industrials ETFs category of the market.
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.
A good option for investors who believe in market efficiency, market cap weighted indexes offer 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.
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.
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
Because the fund has amassed over $368.51 million, this makes it one of the average sized ETFs in the Industrials ETFs. RGI is managed by Invesco. RGI seeks to match the performance of the S&P 500 Equal Weight Industrials Index before fees and expenses.
The S&P 500 Equal Weight Industrials Index equally weights stocks in the industrials sector of the S&P 500 Index.
Cost & Other Expenses
When considering an ETF’s total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.
Operating expenses on an annual basis are 0.40% for RGI, making it on par with most peer products in the space.
The fund has a 12-month trailing dividend yield of 1.01%.
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.
For RGI, it has heaviest allocation in the Industrials sector –about 100% of the portfolio.
When you look at individual holdings, Boeing Co/the (BA) accounts for about 1.51% of the fund’s total assets, followed by Caterpillar Inc (CAT) and Norfolk Southern Corp (NSC).
The top 10 holdings account for about 13.3% of total assets under management.
Performance and Risk
So far this year, RGI has gained about 7.11%, and it’s up approximately 4.36% in the last one year (as of 02/13/2023). During this past 52-week period, the fund has traded between $154.92 and $195.63.
RGI has a beta of 1.16 and standard deviation of 27.97% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 72 holdings, it effectively diversifies company-specific risk.
Invesco S&P 500 Equal Weight Industrials ETF is a reasonable option for investors seeking to outperform the Industrials ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
Vanguard Industrials ETF (VIS) tracks MSCI US Investable Market Industrials 25/50 Index and the Industrial Select Sector SPDR ETF (XLI) tracks Industrial Select Sector Index. Vanguard Industrials ETF has $3.84 billion in assets, Industrial Select Sector SPDR ETF has $14.20 billion. VIS has an expense ratio of 0.10% and XLI 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 Industrials ETFs.
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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