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?
Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.
Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.
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 track 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.
Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.
Fund Sponsor & Index
Managed by Invesco, RSPM has amassed assets over $214.69 million, making it one of the average sized ETFs in the Materials ETFs. RSPM seeks to match the performance of the S&P 500 EQUAL WEIGHT MATERIALS INDEX before fees and expenses.
The S&P 500 Equal Weight Materials Index equally weights stocks in the materials sector of the S&P 500 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.
Operating expenses on an annual basis are 0.40% for RSPM, making it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 1.44%.
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.
RSPM's heaviest allocation is in the Materials sector, which is about 100% of the portfolio.
Looking at individual holdings, International Paper Co (IP) accounts for about 3.86% of total assets, followed by Smurfit Westrock Plc (SW) and Cf Industries Holdings Inc (CF).
RSPM's top 10 holdings account for about 37.02% of its total assets under management.
Performance and Risk
The ETF has gained about 5.80% so far this year and was up about 9.44% in the last one year (as of 01/27/2025). In the past 52-week period, it has traded between $31.71 and $37.59.
RSPM has a beta of 1.10 and standard deviation of 19.88% 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 $5.04 billion in assets, FlexShares Morningstar Global Upstream Natural Resources ETF has $5.18 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
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Get it free >>Invesco S&P 500 Equal Weight Materials ETF (RSPM): ETF Research Reports
International Paper Company (IP) : Free Stock Analysis Report
CF Industries Holdings, Inc. (CF) : Free Stock Analysis Report
Materials Select Sector SPDR ETF (XLB): ETF Research Reports
FlexShares Morningstar Global Upstream Natural Resources ETF (GUNR): ETF Research Reports
Smurfit Westrock PLC (SW) : Free Stock Analysis Report
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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.
