If you’re interested in broad exposure to the Energy – Broad segment of the equity market, look no further than the Invesco S&P 500 Equal Weight Energy ETF (RYE), a passively managed exchange traded fund launched on 11/01/2006.
Passively managed ETFs are becoming increasingly popular with institutional as well as retail investors due to their low cost, transparency, flexibility and tax efficiency. They are excellent vehicles for long term investors.
Additionally, sector ETFs offer convenient ways to gain low risk and diversified exposure to a broad group of companies in particular sectors. Energy – Broad is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 1, placing it in top 6%.
The fund is sponsored by Invesco. It has amassed assets over $580.94 million, making it one of the average sized ETFs attempting to match the performance of the Energy – Broad segment of the equity market. RYE seeks to match the performance of the S&P 500 Equal Weight Energy Index before fees and expenses.
The S&P 500 Equal Weight Energy Index equally weights stocks in the energy sector of the S&P 500 Index.
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 counterparts, other things remaining 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 1.93%.
Sector Exposure and Top Holdings
While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund’s holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
This ETF has heaviest allocation in the Energy sector–about 100% of the portfolio.
Looking at individual holdings, Occidental Petroleum Corp (OXY) accounts for about 6.41% of total assets, followed by Apa Corp (APA) and Marathon Oil Corp (MRO).
The top 10 holdings account for about 49.72% of total assets under management.
Performance and Risk
So far this year, RYE return is roughly 39.91%, and was up about 81.26% in the last one year (as of 04/22/2022). During this past 52-week period, the fund has traded between $37.22 and $71.14.
The ETF has a beta of 1.80 and standard deviation of 46.90% for the trailing three-year period, making it a high risk choice in the space. With about 24 holdings, it has more concentrated exposure than peers.
Invesco S&P 500 Equal Weight Energy ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, RYE is a reasonable option for those seeking exposure to the Energy ETFs area of the market. Investors might also want to consider some other ETF options in the space.
Vanguard Energy ETF (VDE) tracks MSCI US Investable Market Energy 25/50 Index and the Energy Select Sector SPDR ETF (XLE) tracks Energy Select Sector Index. Vanguard Energy ETF has $8.51 billion in assets, Energy Select Sector SPDR ETF has $37.83 billion. VDE has an expense ratio of 0.10% and XLE charges 0.10%.
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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