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Is Invesco FTSE RAFI Emerging Markets ETF (PXH) a Strong ETF Right Now?

Smart Beta ETF report for PXH

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This story originally appeared on Zacks

The Invesco FTSE RAFI Emerging Markets ETF (PXH) made its debut on 09/27/2007, and is a smart beta exchange traded fund that provides broad exposure to the Broad Emerging Market ETFs category of the market.

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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.

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

PXH is managed by Invesco, and this fund has amassed over $1.45 billion, which makes it one of the larger ETFs in the Broad Emerging Market ETFs. This particular fund, before fees and expenses, seeks to match the performance of the FTSE RAFI Emerging Markets Index.

The FTSE RAFI Emerging Markets Index is designed to track the performance of the emerging market stocks with the highest ranking cumulative score, selected from the constituents of the FTSE Emerging Large/Mid Cap Index.

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.

With on par with most peer products in the space, this ETF has annual operating expenses of 0.50%.

It's 12-month trailing dividend yield comes in at 2.78%.

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.

When you look at individual holdings, Taiwan Semiconductor Manufacturing Co Ltd accounts for about 3.59% of the fund's total assets, followed by Hon Hai Precision Industry Co Ltd and China Construction Bank Corp.

Its top 10 holdings account for approximately 24.51% of PXH's total assets under management.

Performance and Risk

Year-to-date, the Invesco FTSE RAFI Emerging Markets ETF has added roughly 10.73% so far, and was up about 28.66% over the last 12 months (as of 10/22/2021). PXH has traded between $17.50 and $24.30 in this past 52-week period.

PXH has a beta of 0.84 and standard deviation of 23.73% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 421 holdings, it effectively diversifies company-specific risk.

Alternatives

Invesco FTSE RAFI Emerging Markets ETF is not a suitable option for investors seeking to outperform the Broad Emerging Market ETFs segment of the market. Instead, there are other ETFs in the space which investors should consider.

IShares Core MSCI Emerging Markets ETF (IEMG) tracks MSCI Emerging Markets Investable Market Index and the Vanguard FTSE Emerging Markets ETF (VWO) tracks FTSE Emerging Markets All Cap China A Inclusion Index. IShares Core MSCI Emerging Markets ETF has $81.12 billion in assets, Vanguard FTSE Emerging Markets ETF has $82.14 billion. IEMG has an expense ratio of 0.11% and VWO 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 Broad Emerging Market 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

 

Invesco FTSE RAFI Emerging Markets ETF (PXH): ETF Research Reports

 

iShares Core MSCI Emerging Markets ETF (IEMG): ETF Research Reports

 

Vanguard FTSE Emerging Markets ETF (VWO): ETF Research Reports

 

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