As equity markets rallied last month on softer inflation data, investors allocated to consumer discretionary more than any other Invesco equal weight sector ETF.
The Invesco S&P 500 Equal Weight Consumer Discretionary ETF (RCD), which has $520 million in assets under management, took in $142 million in November inflows, offsetting outflows seen earlier in the year. The fund has seen $144 million in year-to-date inflows as of the end of November, according to ETF Database.
RCD outperformed the cap-weighted S&P 500 Consumer Discretionary Sector in November, increasing 8.74% compared to the cap-weighted index’s gain of 2.37%. Year to date through December 6, RCD has declined -21.33% compared to the cap-weight index’s decline of -32.44%.
RCD offers exposure to the consumer discretionary sector of the domestic economy, making it one option available to investors implementing sector rotation strategies or looking to tilt exposure towards a high beta industry, perhaps in anticipation of a bull market.
RCD is based on the S&P 500 Equal Weight Consumer Discretionary Index, which equally weights stocks in the consumer discretionary sector of the S&P 500. RCD invests at least 90% of its total assets in common stocks that comprise the index. Every security is given equal weight at each quarterly rebalance, selling relative winners and buying relative losers.
The fund charges a 40 basis point expense ratio and comprises 58 holdings as of December 6.
Companies included in the consumer discretionary sector include Etsy (ETSY), Tesla Inc. (TSLA), Amazon.com, Inc. (AMZN), Ford Motor Company (F), TJX Companies Inc. (TJX), Las Vegas Sands Corp. (LVS), Ross Stores, Inc. (ROST), Norwegian Cruise Line Holdings Ltd. (NCLH), Target Corporation (TGT), and Starbucks Corporation (SBUX).
Equal weight funds bring factor tilts to portfolios as the strategies learn toward smaller, more undervalued companies than its average category peer. Investors often opt for an equal-weighted fund to remove size bias from a portfolio.
An equal-weight strategy can provide diversification benefits and 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.
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