Launched on 11/01/2006, the Invesco S&P 500 Equal Weight Health Care ETF (RYH) is a smart beta exchange traded fund offering broad exposure to the Health Care 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.
There are some investors, though, who think it’s possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which tracks non-cap weighted strategies.
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 Sponsors & Index
RYH is managed by Invesco, and this fund has amassed over $980.31 million, which makes it one of the larger ETFs in the Health Care ETFs. Before fees and expenses, this particular fund seeks to match the performance of the S&P 500 Equal Weight Health Care Index.
The S&P 500 Equal Weight Health Care Index equals weights stocks in the health care 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 RYH are 0.40%, which makes it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 0.62%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
RYH’s heaviest allocation is in the Healthcare sector, which is about 100% of the portfolio.
Looking at individual holdings, Illumina Inc (ILMN) accounts for about 1.72% of total assets, followed by Moderna Inc (MRNA) and Insulet Corp (PODD).
RYH’s top 10 holdings account for about 16.42% of its total assets under management.
Performance and Risk
Year-to-date, the Invesco S&P 500 Equal Weight Health Care ETF has lost about -0.17% so far, and is up about 2.83% over the last 12 months (as of 05/24/2023). RYH has traded between $249.96 and $303.91 in this past 52-week period.
The ETF has a beta of 0.85 and a standard deviation of 17.57% for the trailing three-year period, making it a medium risk choice in space. With about 66 holdings, it effectively diversifies company-specific risks.
Invesco S&P 500 Equal Weight Health Care ETF is a reasonable option for investors seeking to outperform the Health Care ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
The Vanguard Health Care ETF (VHT) tracks the MSCI US Investable Market Health Care 25/50 Index and the Health Care Select Sector SPDR ETF (XLV) tracks Health Care Select Sector Index. Vanguard Health Care ETF has $16.86 billion in assets, Health Care Select Sector SPDR ETF has $39.91 billion. VHT has an expense ratio of 0.10% and XLV 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 Health Care ETFs.
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on the latest developments in the ETF investing universe, please visit the Zacks ETF Center.
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Invesco S&P 500 Equal Weight Health Care ETF (RYH): ETF Research Reports
Illumina, Inc. (ILMN) : Free Stock Analysis Report
Moderna, Inc. (MRNA) : Free Stock Analysis Report
Insulet Corporation (PODD) : Free Stock Analysis Report
Health Care Select Sector SPDR ETF (XLV): ETF Research Reports
Vanguard Health Care ETF (VHT): ETF Research Reports
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