The Invesco Russell 1000 Equal Weight ETF (EQAL) is a passively managed exchange-traded fund (ETF) designed to provide broad exposure to the Large Cap Blend segment of the US equity market. Launched on December 23, 2014, and sponsored by Invesco, EQAL has amassed over $609.44 million in assets, placing it among the average-sized ETFs targeting this market segment.
Why Large Cap Blend?
Large-cap companies, typically boasting a market capitalization exceeding $10 billion, are often considered a stable investment option. Their established presence and reliable cash flows usually translate to lower risk compared to mid-cap and small-cap companies. Blend ETFs, as their name suggests, hold a mix of growth and value stocks, exhibiting characteristics of both styles.
Cost Considerations
Expense ratios play a crucial role in determining an ETF’s total return. Lower expense ratios can significantly enhance long-term performance, particularly when other factors remain consistent. EQAL boasts an annual operating expense ratio of 0.20%, aligning with most of its peers in the space. It also carries a 12-month trailing dividend yield of 1.67%
Sector Exposure and Top Holdings
While ETFs offer diversification to minimize single-stock risk, examining a fund’s holdings before investing is still essential. Fortunately, most ETFs maintain transparency by disclosing their holdings daily. EQAL has its largest allocation in the Information Technology sector, accounting for approximately 12.20% of the portfolio. Financials and Real Estate follow closely as the top three sectors. Looking at individual holdings, Charter Communications Inc (CHTR) comprises about 0.69% of total assets, followed by Liberty Broadband Corp (LBRDK) and Ubiquiti Inc (UI). The top 10 holdings represent roughly 6.03% of the total assets under management.
Performance and Risk
EQAL aims to replicate the performance of the Russell 1000 Equal Weight Index before fees and expenses. The Russell 1000 Equal Weight Index consists of securities from the Russell 1000 Index, with equal weighting across nine sector groups and each security within a sector receiving equal weight. The ETF has gained approximately 9.20% year-to-date and has risen around 16.71% in the past year (as of September 17, 2024). Over the past 52 weeks, it has traded between $37.43 and $47.80. EQAL exhibits a beta of 1.10 and a standard deviation of 18.24% for the trailing three-year period, classifying it as a medium-risk choice within its category. With roughly 997 holdings, it effectively diversifies company-specific risk.
Alternatives
Invesco Russell 1000 Equal Weight ETF carries a Zacks ETF Rank of 3 (Hold), based on factors like expected asset class return, expense ratio, and momentum. Consequently, EQAL serves as a suitable option for those seeking exposure to the Style Box – Large Cap Blend segment of the market. Investors may also consider alternative ETFs in this space, such as the iShares Core S&P 500 ETF (IVV) and the SPDR S&P 500 ETF (SPY), both tracking similar indexes. While iShares Core S&P 500 ETF boasts $521.05 billion in assets, SPDR S&P 500 ETF manages $555.26 billion. IVV carries an expense ratio of 0.03%, while SPY charges 0.09%.
Bottom Line
Passively managed ETFs, like EQAL, are widely favored by institutional and retail investors due to their low costs, transparency, flexibility, and tax efficiency. They offer an excellent vehicle for long-term investors seeking diversified exposure to the large-cap blend segment of the US equity market.
