Should Invesco S&P SmallCap 600 Pure Value ETF (RZV) Be on Your Investing Radar?

The Invesco S&P SmallCap 600 Pure Value ETF (RZV - Free Report) was established on March 1, 2006. This exchange-traded fund is managed passively and aims to provide comprehensive exposure to the Small Cap Value sector within the U.S. equity market.

Sponsored by Invesco, the fund has gathered assets totaling over $271.34 million, positioning it as an average-sized ETF focused on the Small Cap Value segment.

Why Consider Small Cap Value?

Investing in small cap companies—which are characterized by market capitalizations under $2 billion—can be a double-edged sword. While there is a potential for significant growth, these investments also carry heightened risks.

Value stocks typically display lower price-to-earnings and price-to-book ratios, and they often experience slower sales and earnings growth compared to their growth stock counterparts. Historically, value stocks have outperformed growth stocks in most market conditions over the long term. However, during strong bull markets, growth stocks generally reclaim the spotlight.

Cost Considerations

When investing in an ETF, the expense ratio is a critical element that can influence overall returns. Lower-cost funds usually have a better chance of outperforming those with higher expenses, assuming all other factors remain equal.

The Invesco S&P SmallCap 600 Pure Value ETF maintains an annual expense ratio of 0.35%, which is comparable to many of its peers in the industry.

This ETF offers a 12-month trailing dividend yield of 1.04%.

Sector Allocation and Key Holdings

Understanding the holdings of an ETF is essential before making an investment decision, even though these funds often provide diversified exposure that mitigates the risks associated with single-stock investments. Most ETFs offer transparency by disclosing their holdings daily.

The Invesco S&P SmallCap 600 Pure Value ETF allocates approximately 22.80% of its portfolio to the Financials sector. The top three sectors also include Industrials and Consumer Discretionary.

In terms of individual companies, Echostar Corp (SATS - Free Report) constitutes around 2.27% of the total assets, with Phinia Inc (PHIN - Free Report) and Fresh Del Monte Produce Inc (FDP - Free Report) following closely behind. Collectively, the top 10 holdings make up about 19.29% of the total assets.

Performance and Risk Assessment

The primary goal of RZV is to replicate the performance of the S&P SmallCap 600 Pure Value Index, which measures securities with robust value characteristics within the S&P SmallCap 600 Index.

As of December 11, 2024, the ETF has yielded a return of approximately 11.09% for the current year and a significant rise of 21.07% over the past year. In the last 52 weeks, its trading range has been between $96.80 and $119.36.

With a beta of 1.43 and a standard deviation of 24.23% over the trailing three-year period, RZV carries a higher risk profile. However, with 137 holdings, the fund effectively diversifies company-specific risks.

Exploring Alternatives

The Invesco S&P SmallCap 600 Pure Value ETF has been rated with a Zacks ETF Rank of 3 (Hold), which takes into account factors like projected asset class returns, expense ratios, and market momentum. Thus, RZV could be an appealing option for investors desiring exposure to the Small Cap Value segment of the market.

Additionally, investors might want to explore alternatives such as the Avantis U.S. Small Cap Value ETF (AVUV - Free Report) and the Vanguard Small-Cap Value ETF (VBR - Free Report). The Avantis fund boasts $15.99 billion in assets, while the Vanguard fund has $32.65 billion. In terms of fees, AVUV has an expense ratio of 0.25%, whereas VBR’s expense ratio is at an even more attractive 0.07%.

Conclusion

Both retail and institutional investors are increasingly gravitating toward passively managed ETFs because they provide cost-effectiveness, transparency, and tax efficiency. These funds are also excellent options for long-term investment strategies.

For more information regarding this ETF and other investment products, investors are encouraged to research options that align with their investment goals and stay updated on recent developments in the ETF universe.

ETF, Investing, SmallCap