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 designed to represent the market or a specific market segment.
Market cap-weighted indexes are 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 underweighted strategies: smart beta.
These indexes attempt to select stocks that have a better chance of risk-return performance based on some key characteristic or combination of such characteristics.
Methods like equal-weighting, one of the simplest options out there, basic weighting, and volatility/momentum-based weighting are all options offered to investors in this space, but not all of them can deliver great returns .
Fund and Index Sponsor
The fund is managed by Invesco, and has accumulated more than $2.03 billion, making it one of the larger 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 and Other Expenses
For ETF investors, expense ratios are an important factor when considering a fund’s return; over 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 reduce single stock risk, but it’s still important to review 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 to the Information Technology sector, which is nearly 100% of the portfolio.
If you look at individual holdings, Intuit Inc INTO accounts for approximately 1.44% of the fund’s total assets, followed by Epam Systems Inc EPAM and Servicenow Inc NOW.
The top 10 holdings account for approximately 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% over the past one year (since 07/26/2022). Over the past 52-week period, it has traded between $229.64 and $327.55.
The fund has a beta of 1.14 and a standard deviation of 29.33% for the next three years, making RYT a medium risk choice in this particular space. With approximately 77 holdings, it effectively diversifies company-specific risk.
Alternatives
The 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 that investors may also consider.
Technology Select Sector SPDR ETF XLK tracks the Technology Select Sector Index and the Vanguard Information Technology ETF VGT tracks the MSCI US Investable Market Information Technology 25/50 Index. The Technology Select Sector SPDR ETF has $40.50 billion in assets, the 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, lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of Technology ETFs.
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