2 Equal Weight Sector ETFs Outperformed the S&P 500 in Sept

The S&P 500 finished September on a down note, with the index notching its worst month since March 2020.

September has historically been a bad month for investors, with the S&P 500 falling on average by about 1%, according to Howard Silverblatt, senior analyst at S&P Dow Jones Indices. The S&P 500 fell 9.3% last month – its worst September performance in 20 years.

Two funds in Invesco’s range of S&P 500 equal weight sector ETFs outperformed the cap-weighted S&P 500 during the month: the Invesco S&P 500® Equal Weight Health Care ETF (RYH) and the Invesco S&P 500 Equal Weight Financials ETF (RYF), which decreased 6.49% and 8.65%, respectively, as of September 30, according to VettaFi.

RYH ​​provides exposure to the domestic healthcare industry with a unique methodology: equal weighting. A strategy like this might appeal to investors looking to avoid the traditional indexing methodology which typically distributes holdings based on market cap.

RYH is designed to offer more balanced exposure for the long-term investor since it has the added benefit of avoiding the potentially adverse impact of rallies or crashes in a specific sub-industry within healthcare.

The fund has exhibited a tilt toward low-volatility stocks, or companies whose shares have a history of lower standard deviation of returns. Such exposure tends to pay off most during periods of market stress, according to VettaFi.

RYF offers focused exposure to the financial sector of the U.S. economy for investors looking to overweight banks and other financial institutions in their portfolios.

RYF distinguishes itself from other broad-based financial ETFs by its weighting methodology. Unlike cap-weighted products, RYF is linked to an equal-weighted index, meaning that each component receives an equivalent allocation in the fund upon rebalancing. 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, according to VettaFi.

For more news, information, and strategy, visit our Portfolio Strategies Channel.