Investors looking for concentrated exposure to the materials sector of the S&P 500 may consider this ETF.
While the S&P 500 is down nearly 13% as of the end of April, the S&P 500 Equal Weight Materials Index has been able to mitigate losses, returning 0.12% during the same period, according to data from Invesco’s website.
Over a one-year period, the S&P 500 is up just 0.21% while the Equal Weight Materials Index is up 10.58%, according to data from Invesco’s website.
Investors can gain exposure with the Invesco S&P 500 Equal Weight Materials ETF (RTM). This ETF offers exposure to equities included in the S&P 500 Materials Index, which covers the following industries: chemicals, construction materials, containers and packaging, metals and mining, and paper and forest products, according to VettaFi.
RTM is different from other ETFs tracking the same index because it employs a unique equal-weighted strategy, meaning that component companies receive approximately equal allocations. That results in exposure that is considerably more balanced than other alternatives, and a methodology that some investors believe will add value over the long haul, according to VettaFi.
An equal-weight strategy can reduce concentration risk by weighting each constituent company equally so that a small group of companies does not have an outsized impact on the index.
The fund has 30 holdings as of May 26, 92.95% of which are large-cap companies and 7.05% are mid-cap companies, according to VettaFi.
Holdings in the fund currently include Albemarle Corporation (ALB), Amcor PLC TEMP (AMCDC), Corteva Inc. (CTVA), Sherwin-Williams Company (SHW), and Sherwin-Williams Company (SHW), among others, according to VettaFi.
The fund charges a 40 basis point expense ratio.
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