Launched on 11/01/2006, the Invesco S&P 500 Equal Weight Industrials ETF (RGI) is a smart beta exchange traded fund offering broad exposure to the Industrials ETFs category of the market.
What Are Smart Beta ETFs?
Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.
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.
But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.
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.
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
RGI is managed by Invesco, and this fund has amassed over $597.87 million, which makes it one of the average sized ETFs in the Industrials ETFs. Before fees and expenses, RGI seeks to match the performance of the S&P 500 Equal Weight Industrials Index.
This index is an unmanaged equal weighted version of the S&P 500 Industrials Index that consists of the common stocks of the following industries: aerospace & defense, building products, construction & engineering, electrical equipment, conglomerates, machinery; commercial services & supplies, air freight & logistics, airlines, marine, road & rail transportation infrastructure.
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 RGI, making it one of the cheaper products in the space.
RGI's 12-month trailing dividend yield is 0.73%.
Sector Exposure and Top Holdings
Most ETFs are very transparent products, and disclose their holdings on a daily basis. ETFs also offer diversified exposure, which minimizes single stock risk, though it's still important for investors to research a fund's holdings.
This ETF has heaviest allocation in the Industrials sector - about 100% of the portfolio.
Looking at individual holdings, Kansas City Southern (NYSE:KSU) accounts for about 1.56% of total assets, followed by Lockheed Martin Corp (LMT) and An O Smith Corp (AOS).
Its top 10 holdings account for approximately 14.22% of RGI's total assets under management.
Performance and Risk
The ETF has added about 22.21% so far this year and was up about 72.65% in the last one year (as of 05/26/2021). In the past 52-week period, it has traded between $115.23 and $191.68.
The fund has a beta of 1.25 and standard deviation of 26.66% for the trailing three-year period, which makes RGI a medium risk choice in this particular space. With about 75 holdings, it effectively diversifies company-specific risk.
Alternatives
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 (NYSE:XLI) tracks Industrial Select Sector Index. Vanguard Industrials ETF has $5.28 billion in assets, Industrial Select Sector SPDR ETF has $20.41 billion. VIS has an expense ratio of 0.10% and XLI charges 0.12%.
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.
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.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
INVS-SP5 EW IND (RGI): ETF Research Reports
Kansas City Southern (KSU): Free Stock Analysis Report
A. O. Smith Corporation (AOS): Free Stock Analysis Report
Lockheed Martin Corporation (NYSE:LMT): Free Stock Analysis Report
VIPERS-INDUS (VIS): ETF Research Reports
SPDR-INDU SELS (XLI): ETF Research Reports
To read this article on Zacks.com click here.