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The Invesco S&P 500 Equal Weight Materials ETF (RSPM) made its debut on 11/01/2006, and is a smart beta exchange traded fund that provides broad exposure to the Materials 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

RSPM is managed by Invesco, and this fund has amassed over $285.54 million, which makes it one of the average sized ETFs in the Materials ETFs. This particular fund, before fees and expenses, seeks to match the performance of the S&P 500 EQUAL WEIGHT MATERIALS INDEX .

The S&P 500 Equal Weight Materials Index equally weights stocks in the materials 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.

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

RSPM's 12-month trailing dividend yield is 1.95%.

Sector Exposure and Top Holdings

It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

RSPM's heaviest allocation is in the Materials sector, which is about 100% of the portfolio.

Taking into account individual holdings, Albemarle Corp (ALB) accounts for about 3.93% of the fund's total assets, followed by Freeport-Mcmoran Inc (FCX) and Nucor Corp (NUE).

The top 10 holdings account for about 36.83% of total assets under management.

Performance and Risk

The ETF has added about 5.15% and was up about 18.17% so far this year and in the past one year (as of 03/20/2024), respectively. RSPM has traded between $28.92 and $35.29 during this last 52-week period.

The ETF has a beta of 1.13 and standard deviation of 20.41% for the trailing three-year period. With about 29 holdings, it has more concentrated exposure than peers.

Alternatives

Invesco S&P 500 Equal Weight Materials ETF is a reasonable option for investors seeking to outperform the Materials ETFs segment of the market. However, there are other ETFs in the space which investors could consider.

Materials Select Sector SPDR ETF (XLB) tracks Materials Select Sector Index and the FlexShares Morningstar Global Upstream Natural Resources ETF (GUNR) tracks Morningstar Global Upstream Natural Resources Index. Materials Select Sector SPDR ETF has $5.45 billion in assets, FlexShares Morningstar Global Upstream Natural Resources ETF has $6.48 billion. XLB has an expense ratio of 0.09% and GUNR charges 0.46%.

Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Materials 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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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.