Invesco specializes in equal-weight indexes.
Invesco offers a sizable mix of mutual funds and exchange-traded funds. The asset manager is widely known for its strength in international investing and its fixed-income offerings, specifically the BulletShares series of bond-laddering funds it acquired when it bought OppenheimerFunds in 2019. Craig Bolanos, CEO of Wealth Management Group, says the firm’s deep offering of equal-weighted index funds makes it a standout for investors who are looking for an alternative to market-cap weighted indexes. Most index funds are market-cap weighted, which means the biggest stocks make up the largest percentage of the index. An equal-weight fund means no one stock dominates the index. “Equal weight indices deserve a seat at the table,” Bolanos says. Here are seven Invesco mutual funds and ETFs to consider.
Invesco S&P 500 Equal Weight ETF (ticker: RSP)
Bolanos likes RSP as an alternative to a market-cap weighted S&P 500 index. RSP gives investors greater exposure to smaller-cap companies — firms that historically grow at a more sustainable rate, Bolanos says. Equal-weight indexes tend to outperform market-cap weighted indexes, in part because of rebalancing, he says. Equal-weight funds can also offer better risk-adjusted returns because, during market breaks, the heaviest-weighted stocks have typically dragged down the rest of the index. In the current market environment, where tech stocks such as Microsoft Corp. (MSFT) dominate the S&P 500, “investors would be well served to consider RSP in their portfolios from a risk-management standpoint,” he says.
Invesco S&P 500 Pure Value ETF (RPV)
Investors seeking more value-oriented ETFs can look to RPV, which Todd Rosenbluth, head of ETF and mutual fund research at CFRA Research, says has a more targeted value approach than other value-focused ETFs. The Invesco ETF uses the S&P 500 as its starting point and seeks companies that have “relatively appealing” book value-to-price, earnings-to-price and sales-to-price metrics. The fund focuses on just 121 companies with the deepest value traits, rather than including companies with a blend of value and growth. The fund also has heavier weighting in sectors such as financials and energy compared to similar value-oriented ETFs. The fund has a relatively low expense ratio of 0.35%, or $35 for every $10,000 invested, and is up around 48% on a one-year basis, versus 32% for the broader S&P 500. “We think the fund is well positioned for continued success over the next nine months,” Rosenbluth says.
Invesco Discovery Mid Cap Growth Fund (OEGAX)
Many investors lack exposure to midcaps, and Steve Azoury, financial advisor and owner of Azoury Financial, has long been a fan of OEGAX for its strong long-term performance. Year to date it’s up by about 20%, putting it in the top quartile of its peers. OEGAX beats its category and index on three-, five- and 10-year time frames. The fund’s top two categories are technology and health care, two sectors that are supporting performance. Tech firm Monolithic Power Systems Inc. (MPWR) and Idexx Laboratories Inc. (IDXX) are two of the fund’s largest holdings. The fund has seasoned managers, and one of them has been with OEGAX since 2007. “It’s a well-diversified, well-managed fund,” Azoury says. “The performance has been very, very consistent.” The fund’s 1.05% expense ratio is also considered to be relatively low among comparable mutual funds.
Invesco S&P 500 Equal Weight Health Care ETF (RYH)
Many health care stocks in the S&P 500 Index are attractive, Rosenbluth says. The research firm highly rates several megacap health care stocks such as Johnson & Johnson (JNJ) and Pfizer Inc. (PFE) in addition to the moderately sized Cardinal Health Inc. (CAH) and Universal Health Services Inc. (UHS). All four of those names are equally weighted in RYH, meaning the ETF holds approximately the same amount of assets in each of these four names. The ETF is also outperforming the bigger and better-known market-cap weighted Health Care Select Sector SPDR (XLV) ETF. The Invesco fund has been buoyed by a higher weighting to sub-industries such as health care facilities and supplies, which have outperformed this year. RYH is up about 32% on a one-year basis.
Invesco S&P Ultra Dividend Revenue ETF (RDIV)
U.S. dividend ETFs were popular in the first half of the year as investors sought income via the equity market. One of the standouts was RDIV. Year to date the fund is up about 18%, and it offers a 4.7% yield. Rosenbluth likes RDIV for its “modest risk profile and high reward potential.” The fund uses several steps to compile the 60-name index, including weeding out firms with the highest dividend yields overall and the highest dividend payout ratios in each sector. Next, the ETF weights the remaining highest dividend payers based on earned revenue, then it rebalances quarterly. The fund is based on the S&P 900 Dividend Revenue-Weighted Index.
Invesco BulletShares 2022 High Yield Corporate Bond ETF (BSJM)
Low interest rates can make it harder for income-seeking investors to find returns, particularly in shorter-dated funds. Daniel Milan, financial advisor and managing partner of Cornerstone Financial Services, says he is using BSJM as a short-term, high-yield option. “The current distribution rate of 3.06% is decent for a one-year hold,” he says. Invesco’s BulletShares offering is a series of fixed-income funds that have defined maturities. Each fund holds securities maturing in the year defined by the fund, so the bonds in this particular fund mature in 2022. By the end of December 2022, the fund’s position will be in cash, which will be distributed to the fund’s shareholders. While the short-term return is fine, he cautions income investors from trying to reach for yield. “BSJM isn’t bad in this environment, but when you go longer out on the terms to 2023, 2024 or 2025, you don’t get much of an increase in distribution rate to make it worth it,” he says.
Invesco National AMT-Free Muni Bond ETF (PZA)
Income-seeking investors may want to look into PZA, a municipal-bond ETF, says Josh Simpson, vice president of operations and investment adviser at Lake Advisory Group. His firm uses this ETF in some accounts as a replacement for holding individual bonds due to low interest rates. “We know that rates are going to have to start going up in the next year or so. PZA is a good play because it does not lock a client’s money down for five years or more, during which time they may miss the opportunity to buy higher interest paying bonds,” Simpson says. Bonds held in PZA are insured against default, and muni bonds are free from federal income tax. The current yield is 2.34% and the annual expense ratio is 0.28%.
Here are seven Invesco mutual funds and ETFs to consider:
— Invesco S&P 500 Equal Weight ETF (RSP)
— Invesco S&P 500 Pure Value ETF (RPV)
— Invesco Discovery Mid Cap Growth Fund (OEGAX)
— Invesco S&P 500 Equal Weight Health Care ETF (RYH)
— Invesco S&P Ultra Dividend Revenue ETF (RDIV)
— Invesco BulletShares 2022 High Yield Corporate Bond ETF (BSJM)
— Invesco National AMT-Free Muni Bond ETF (PZA)
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Update 09/17/21: This story was published at an earlier date and has been updated with new information.