As Bank Earnings Kick Off, Add Exposure with RYF | ETF Trends

Bank earnings kicked off on Friday, offering a preview of what this year will bring for markets.

JPMorgan Chase (JPM) and Bank of America (BAC) were among the first to report earnings for the fourth quarter of 2022, both beating analysts’ expectations. Wells Fargo (WFM) beat estimates, and CitiGroup’s (C) earnings largely met analysts’ expectations.

Morgan Stanley (MS) and Goldman Sachs (GS) report after the weekend on Tuesday.

According to FactSet, Profits among the six big banks are expected to fall by 15% year over year, while revenue should tick higher due to growing loan books, Barron’s reported.

Investors looking to add exposure to the financials sector should consider the Invesco S&P 500 Equal Weight Financials ETF (RYF), which offers concentrated exposure to the sector while limiting concentration risk by utilizing an equal weight methodology.

RYF distinguishes itself from other broad-based financial ETFs by its equal weight approach. Unlike cap-weighted products, each component in RYF receives an equal allocation in the fund upon each quarterly rebalance. This institutes an anti-momentum effect by selling relative winners and buying relative losers at each rebalance.

As a result, RYF maintains considerably lower concentration than most financial ETFs, as exposure is spread around evenly as opposed to being concentrated among a handful of mega-cap stocks. This enhances the diversification in a portfolio’s financials exposure and limits concentration risk.

RYF holds 68 securities as of January 12, according to ETF Database. The fund has returned 14.8% over a three-month period and 4.2% over a one-month period. The fund is down -11.1% over a one-year period.

Inception in 2006, RYF has $429 million in assets under management. The fund has seen $12 million in outflows over a one-month period and $21 million in outflows over a one-year period, according to ETF Database.

RYF charged 40 basis points.

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