Should the Invesco S&P SmallCap 600 Pure Value ETF (RZV) Be on Your Investing Radar?

The Invesco S&P SmallCap 600 Pure Value ETF (RZV - Free Report) was launched on March 1, 2006, as a passively managed exchange traded fund. It aims to provide wide exposure to the Small Cap Value segment of the U.S. equity market.

Sponsored by Invesco, this fund has gathered assets exceeding $271.34 million, making it a moderately sized ETF focused on matching the Small Cap Value segment of the U.S. equity market.

Why Consider Small Cap Value?

Small cap companies, those with market capitalizations below $2 billion, are often associated with higher potential rewards but also come with increased risks. Value stocks in this category tend to have lower price-to-earnings and price-to-book ratios compared to growth stocks. Although historical performance suggests that value stocks often outperform growth stocks over the long term, growth stocks typically do better during strong market rallies.

Expense Considerations

Expense ratios significantly influence the return on investment for ETFs. Over time, funds with lower expense ratios often outperform their higher-cost counterparts when other factors remain constant.

The annual operating expense for the Invesco S&P SmallCap 600 Pure Value ETF stands at 0.35%, aligning it with many of its peers in the same category. Additionally, it boasts a 12-month trailing dividend yield of 1.04%.

Sector Allocation and Key Holdings

Before investing in an ETF, it is crucial to examine its holdings, despite their benefits like diversified risk management. Most ETFs maintain transparency, providing daily updates on their holdings.

This ETF has its highest allocation in the Financials sector, which comprises approximately 22.80% of the portfolio. Following Financials, the Industrials and Consumer Discretionary sectors rank next in holdings.

Among its individual holdings, Echostar Corp (SATS - Free Report) constitutes around 2.27% of total assets, with Phinia Inc (PHIN - Free Report) and Fresh Del Monte Produce Inc (FDP - Free Report) also featuring prominently. The top ten holdings collectively make up about 19.29% of the fund's total assets.

Performance and Risk Assessment

The RZV ETF strives to replicate the performance of the S&P SmallCap 600 Pure Value Index, which gauges the performance of securities showcasing strong value characteristics within the S&P SmallCap 600 Index.

As of December 11, 2024, the ETF has achieved a return of approximately 11.09% this year and has seen an increase of about 21.07% over the last year. Throughout the past 52 weeks, it has traded in a range between $96.80 and $119.36.

With a beta of 1.43 and a standard deviation of 24.23% observed during the trailing three-year period, this ETF represents a higher risk investment. Nevertheless, with around 137 holdings, it effectively reduces individual stock risk.

Alternative Investment Options

The Invesco S&P SmallCap 600 Pure Value ETF holds a Zacks ETF Rank of 3 (Hold), which takes into account expected class returns, expense ratios, and momentum, among other factors. This makes RZV a viable choice for investors seeking exposure to the Small Cap Value portion of the market. However, it is worthwhile to consider other ETFs in the same space.

Investors might look into the Avantis U.S. Small Cap Value ETF (AVUV - Free Report) and the Vanguard Small-Cap Value ETF (VBR - Free Report), which track similar indices. The Avantis fund has assets totaling $15.99 billion, while Vanguard’s fund holds $32.65 billion. Notably, AVUV has an expense ratio of 0.25%, while VBR charges just 0.07%.

Conclusion

Investors, both retail and institutional, are increasingly drawn to passively managed ETFs. These investment vehicles typically come with low costs, high transparency, flexibility, and tax efficiency, making them excellent options for long-term investment strategies.

To explore more about this product and other available ETFs, it is advisable to screen for options that match specific investment goals and stay updated with the latest developments in the ETF landscape.

ETF, Investment, SmallCap