Making its debut on 11/01/2006, smart beta exchange traded fund Invesco S&P 500 Equal Weight Financials ETF (RYF) provides investors 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.

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.

The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.

Fund Sponsor & Index

Managed by Invesco, RYF has amassed assets over $331.76 million, making it one of the average sized ETFs in the Financials ETFs. Before fees and expenses, RYF 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.

Operating expenses on an annual basis are 0.40% for RYF, making it on par with most peer products in the space.

RYF's 12-month trailing dividend yield is 2.90%.

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.

Representing 100% of the portfolio, the fund has heaviest allocation to the Financials sector.

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

RYF's top 10 holdings account for about 15.38% of its total assets under management.

Performance and Risk

Year-to-date, the Invesco S&P 500 Equal Weight Financials ETF has lost about -12.82% so far, and is down about -22.10% over the last 12 months (as of 03/21/2023). RYF has traded between $48.43 and $65.57 in this past 52-week period.

RYF has a beta of 1.09 and standard deviation of 29.05% 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 a reasonable option for investors seeking to outperform the Financials ETFs segment of the market. However, there are other ETFs in the space which investors could consider.

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 $7.79 billion in assets, Financial Select Sector SPDR ETF has $27.89 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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