Is Invesco S&P 500 Equal Weight Technology ETF (RYT) A Strong ETF Right Now?

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Designed to provide broad exposure to the Technology ETFs category of the market, the Invesco S&P 500 Equal Weight Technology ETF RYT is a smart beta exchange-traded fund launched on 11/01/2006.

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.

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.

However, some investors believe in the possibility of beating the market through exceptional stock selection and choose a different type of fund that tracks non-cap weighted strategies: smart beta.

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.

Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum-based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.

Fund Sponsor & Index

The fund is managed by Invesco, and has been able to amass over $2.03 billion, which makes it one of the larger ETFs in the Technology ETFs. RYT, before fees and expenses, seeks to match the performance of the S&P 500 Equal Weight Information Technology Index.

The S&P 500 Equal Weight Information Technology Index equally weights stocks in the information technology sector of the S&P 500 Index.

Cost & Other Expenses

For ETF investors, expense ratios are an important factor when considering a fund’s return; in the long-term, cheaper funds actually have the ability to outperform their more expensive cousins if all other things remain the same.

Annual operating expenses for this ETF are 0.40%, making it one of the cheaper products in the space.

It has a 12-month trailing dividend yield of 0.63%.

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.

RYT’s heaviest allocation is in the Information Technology sector, which is about 100% of the portfolio.

When you look at individual holdings, Intuit Inc INTU accounts for about 1.44% of the fund’s total assets, followed by Epam Systems Inc EPAM and Servicenow Inc NOW.

The top 10 holdings account for about 13.97% of total assets under management.

Performance and Risk

The ETF has lost about -21.44% so far this year and is down about -13.11% in the last one year (as of 07/26/2022). In the past 52-week period, it has traded between $229.64 and $327.55.

The fund has a beta of 1.14 and standard deviation of 29.33% for the trailing three-year period, which makes RYT a medium risk choice in this particular space. With about 77 holdings, it effectively diversifies company-specific risk.

Alternatives

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

Technology Select Sector SPDR ETF XLK tracks Technology Select Sector Index and the Vanguard Information Technology ETF VGT tracks MSCI US Investable Market Information Technology 25/50 Index. Technology Select Sector SPDR ETF has $40.50 billion in assets, Vanguard Information Technology ETF has $43.01 billion. XLK has an expense ratio of 0.10% and VGT 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 Technology ETFs.


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