At an investment house as big as Invesco, which manages $1.6 trillion and has 217 listed U.S. exchange traded funds, the risk small investors face is a paradox of choice: Too many options can leave some customers overwhelmed, and ultimately less than satisfied with their choices.
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Analysts Todd Rosenbluth of VettaFi and Aniket Ullal of CFRA Research cut through the clutter to identify seven funds that are solid choices for a long-run-focused small investor. The goal was to identify a mix of growth and income opportunities, with diversification around industries, geographies and investment styles. They’re not necessarily the best performers in the last year or so, but they represent a good mix for people who want to make longer-term choices that balance each other out.
Here are some of the best Invesco funds to buy:
| Invesco fund | Expense ratio |
| Invesco Nasdaq 100 ETF (ticker: QQQM) | 0.15% |
| Invesco Value Opportunities Fund (VVOAX) | 1.11% |
| Invesco High Yield Equity Dividend Achievers ETF (PEY) | 0.52% |
| Invesco Dividend Achievers ETF (PFM) | 0.52% |
| Invesco S&P Emerging Markets Low Volatility ETF (EELV) | 0.29% |
| Invesco FTSE RAFI Emerging Markets ETF (PXH) | 0.29% |
| Invesco Russell 1000 Dynamic Multifactor ETF (OMFL) | 0.29% |
| Invesco S&P 500 Index Fund (SPIAX) | 0.54% |
Invesco Nasdaq 100 ETF (QQQM)
If you watch sports on TV, you’ve likely seen ads for Invesco’s QQQ Trust (QQQ), which follows the technology innovators of the Nasdaq-100 stock index. But Ullal tabbed the well-known fund’s ETF cousin, which owns the same stocks and charges lower management fees.
Just as at the QQQ fund, the QQQM’s top five holdings are Microsoft Corp. (MSFT), Apple Inc. (AAPL), Nvidia Corp. (NVDA), Amazon.com Inc. (AMZN) and Tesla Inc. (TSLA), so the same megatrend bets on cloud computing, mobile phones and data, artificial intelligence and electric vehicles are in place. But with a management fee of 0.15%, compared with 0.2% for QQQ, an investor will save a little money without giving up anything but a bit of liquidity that long-term portfolio holders won’t use.
“It’s a good way for investors to get exposure to stocks that trade on the Nasdaq, with a significant tilt to tech and communication services,” Ullal said.
There’s a lot of talk about how tech stock outperformance tends to be concentrated in top names, and those are the ones the two funds hold. That’s how the Nasdaq-100 has beaten the Nasdaq Composite Index by around 3 percentage points a year over the last decade — a 19% difference overall. The QQQM fund itself, which hasn’t been around for that long, has beaten the Nasdaq composite by more than seven percentage points over the last year.
Expense ratio: 0.15%
Invesco Value Opportunities Fund (VVOAX)
This $2.4 billion mutual fund lets an investor balance out the QQQM with companies that are smaller and not concentrated in technology. Industrial companies make up 24% of the fund’s assets, and its biggest holding as of its last regulatory filing — Centene Corp. (CNC) — sells health insurance. The idea is to have a longer-term approach that will correct for market cycles, the firm says.
The returns, helped by stellar performance over the last three years, have been consistent with what a small investor wants from a retirement portfolio. At just under 9% a year for the last 10 years, the fund’s gains in net asset value narrowly beat its benchmark, the S&P 1500 Value Total Return Index. That said, its 1.11% expense ratio is high.
Expense ratio: 1.11%
Invesco High Yield Equity Dividend Achievers ETF (PEY) and Invesco Dividend Achievers ETF (PFM)
Ullal tapped the high-yield Dividend Achievers fund, while Rosenbluth highlighted a broader dividend fund. In each, the goal is to deliver balanced growth — not going too far out on a limb to reach for capital gains, and collecting some dividends along the way.
Based on the Nasdaq US Dividend Achievers 50 Index, PEY will normally invest at least 90% of its assets in dividend-paying common stocks, Invesco says.
“It’s good for equity-income-focused investors because it holds 50 stocks that have both high dividend yields and consistent dividend growth,” Ullal said. More than a quarter of the fund is in financial stocks, with a bias toward mid- and small-capitalization companies. Top holdings include VF Corp. (VFC), maker of Wrangler jeans; insurance company Lincoln National Corp. (LNC), whose dividend yield zoomed after write-offs in its insurance business; and Cleveland-based regional bank Keycorp (KEY).
That strategy is having a rough go in 2023 — both the fund and its benchmark have lost money year to date — but has been a solid performer over time. In the last decade, PEY has delivered returns of 10.2% a year, Invesco says, splitting the difference between underperforming Nasdaq’s dividend index and slightly besting a similar index from the Dow Jones division of News Corp.
In contrast to the PEY fund, the PFM fund goes for companies where the dividends are often lower but the companies are less likely to be distressed. Eight of its top 10 holdings are part of the blue-chip Dow Jones Industrial Average, and the other two, chipmaker Broadcom Inc. (AVGO) and MasterCard Inc. (MA) are still well-known names.
The two funds have had similar returns. PFM has gained 10.7% a year over the last decade, meaning a $10,000 investment would turn into about $25,000. They also have identical 0.52% annual expense ratios.
Expense ratios: 0.52%
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Invesco S&P Emerging Markets Low Volatility ETF (EELV) and Invesco FTSE RAFI Emerging Markets ETF (PXH)
Accepting the premise that some international exposure is good for most investors, even though it comes with higher risks in developing markets, Rosenbluth singled out this fund that tracks an index of the 200 least volatile emerging markets companies.
Its biggest bets are on large-cap financial and consumer companies from Taiwan, Thailand and Malaysia, with top holdings including Malayan Banking Berhad (MLYNF), Airports of Thailand Public Company Ltd. (APTPF), and Dubai Electricity and Water Authority (PJSC). But no stock is more than 1% of the fund’s portfolio. Morningstar rates the fund 4 stars overall, but its recent performance has earned it five stars.
The fund has topped 10% returns over the last three years, but like many emerging markets funds this one had some rough spots in the 2010s. Ten-year gains are 2.6% annually, trailing the S&P Emerging Markets Low Volatility Index by nearly a percentage point per year. Its management fee and total expense is 0.29% annually.
Ullal’s choice for emerging markets was the PXH fund, which he called “a way for investors to get diversified access to emerging equities stocks that are selected based on fundamental metrics like book value, cash flows and sales.” It has outperformed EELV over the last decade, and trailed it more recently. It has more money in financial services and tech stocks, and a much higher weighting in mainland China.
Expense ratios: 0.29%
Invesco Russell 1000 Dynamic Multifactor ETF (OMFL)
Focused on mid- and small-cap U.S. stocks, this $4.5 billion fund uses a “rules-based approach that re-weights large-cap securities of the Russell 1000 Index according to economic cycles and market conditions,” Invesco said. In practice, that means much less technology than the Dow Jones or S&P 500 indices, with more exposure to industrial and energy stocks than the Dow.
That means top holdings include airlines like Delta Air Lines Inc. (DAL) and United Airlines Holdings Inc. (UAL), bank Synchrony Financial (SYF) and Marathon Oil Corp. (MRO) — but no stock is more than about 1% of the portfolio. Fees are a relatively modest 0.29% of holdings.
The Russell 1000 has beaten the Dow Jones Industrials and S&P 500 over the last decade, according to an Invesco report. This fund is younger than that, but has posted 14.7% annual gains since inception, topping its benchmark index by more than three points a year.
“It has done a good job,” Rosenbluth said. “It’s like active management, but with a rules-based approach.”
Expense ratio: 0.29%
Invesco S&P 500 Index Fund (SPIAX)
Don’t overthink this: Most fund managers — let alone individual investors — can’t consistently beat the S&P 500. So any long-term portfolio for the “rest of us” should include this exercise in humility, accepting that the masses of investors are smarter than any one of us is. As Warren Buffett himself says, the best strategy is usually betting on the overall ingenuity of the American economy.
This fund, like all index funds, owns the stocks in the S&P 500, dominated by firms whose products people use every day. Its net asset value has risen a compounded 12.4% over the last decade, basically tripling clients’ money, according to Invesco. One negative: At 0.54%, its expense ratio is relatively high for a passive fund. State Street’s SPDR S&P 500 ETF Trust (SPY) has delivered essentially the same performance for a fee now at 0.09%.
Expense ratio: 0.54%
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8 Best Invesco Funds to Buy and hold originally appeared on usnews.com
