Is Invesco S&P 500 Equal Weight Consumer Discretionary ETF (RCD) a Strong ETF Right Now?
Smart Beta ETF report for RCD
Making its debut on 11/01/2006, smart beta exchange traded fund Invesco S&P 500 Equal Weight Consumer Discretionary ETF (RCD) provides investors broad exposure to the Consumer Discretionary 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.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
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.
Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.
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
The fund is sponsored by Invesco. It has amassed assets over $603.25 million, making it one of the average sized ETFs in the Consumer Discretionary ETFs. Before fees and expenses, this particular fund seeks to match the performance of the S&P 500 Equal Weight Consumer Discretionary Index.
The S&P 500 Equal Weight Consumer Discretionary Index is an unmanaged equal weighted version of the S&P 500 Consumer Discretionary Index that consists of common stocks of companies that comprise the Consumer Discretionary Sector of the S&P 500 Index.
Cost & Other Expenses
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive cousins if all other fundamentals are the same.
Annual operating expenses for this ETF are 0.40%, making it one of the cheaper products in the space.
RCD's 12-month trailing dividend yield is 0.39%.
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.
This ETF has heaviest allocation in the Consumer Discretionary sector - about 100% of the portfolio.
Taking into account individual holdings, Nike Inc (NKE) accounts for about 1.95% of the fund's total assets, followed by Etsy Inc (ETSY) and Chipotle Mexican Grill Inc (CMG).
Its top 10 holdings account for approximately 18.08% of RCD's total assets under management.
Performance and Risk
So far this year, RCD has gained about 27.59%, and was up about 50.38% in the last one year (as of 10/29/2021). During this past 52-week period, the fund has traded between $102.17 and $153.18.
RCD has a beta of 1.41 and standard deviation of 29.19% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 65 holdings, it effectively diversifies company-specific risk.
Invesco S&P 500 Equal Weight Consumer Discretionary ETF is a reasonable option for investors seeking to outperform the Consumer Discretionary ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
Vanguard Consumer Discretionary ETF (VCR) tracks MSCI US Investable Market Consumer Discretionary 25/50 Index and the Consumer Discretionary Select Sector SPDR ETF (XLY) tracks Consumer Discretionary Select Sector Index. Vanguard Consumer Discretionary ETF has $7.08 billion in assets, Consumer Discretionary Select Sector SPDR ETF has $22.24 billion. VCR has an expense ratio of 0.10% and XLY charges 0.12%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Consumer Discretionary ETFs.
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 Consumer Discretionary ETF (RCD): ETF Research Reports
NIKE, Inc. (NKE): Free Stock Analysis Report
Chipotle Mexican Grill, Inc. (CMG): Free Stock Analysis Report
Etsy, Inc. (ETSY): Free Stock Analysis Report
Consumer Discretionary Select Sector SPDR ETF (XLY): ETF Research Reports
Vanguard Consumer Discretionary ETF (VCR): ETF Research Reports
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