Smart beta investing with Invesco ETFs

Market cap equals stock price multiplied by the number of outstanding shares.

Market-capitalization weighting is an investing strategy in which the weight of each security is determined by its [Callout word in:] market cap. This approach favors larger companies. [Callout word out:]

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Factor groups

• Offensive factors
• Defensive factors
• Trending factors

Smart beta investing, sometimes called factor investing, offers an alternative approach to weighting by market cap. This rules-based investing style seeks to identify the stocks of companies with certain quantifiable characteristics that have been shown to contribute meaningfully to higher returns over time. These characteristics, known as rewarded factors, can be organized into different groups based on their historical characteristics during different market environments. [Word in, headline: Factor groups] [First bullet in: Offensive factors] The offensive group contains factors that tend to be more aggressive, risky, and volatile. Offensive factors aim to outperform the broad market during periods of strong equity returns or accelerating economic growth. [Second bullet in: Defensive factors] The defensive group contains factors that seek to mitigate downside risk and produce a tempered risk profile. Defensive factors aim to outperform in down markets or decelerating economic growth and tend to have lower volatility. [Third bullet in: Trending factors] And trending factors can be offensive or defensive but lean toward benefiting from consistent market trends.

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Factor groups

• Offensive factors
  • Value
  • Size
• Defensive factors
  • Quality
  • Low volatility
  • Dividend yield
• Trending factors
  • Momentum

[First minor bullet in: Value] The value reward factor looks at stocks trading at a discount to intrinsic value based on measures such as price-to-earnings or sales. [Second minor bullet in: Size] Size involves stocks with smaller market capitalizations. [Third minor bullet in: Quality] Quality concerns stocks with low leverage and high return on equity, cash flow, and profitability. [Fourth minor bullet in: Low volatility] Low volatility means stocks with lower-than-average volatility or risk. [Fifth minor bullet in: Dividend yield] Dividend yield identifies stocks with higher yields. [Sixth minor bullet in: Momentum] And momentum describes stocks with strong recent performance. [Word out: bullets]

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Single-factor strategy

Our smart beta ETFs can help investors reduce concentration risk and enhance diversification in a transparent and cost-effective way by using a single-factor strategy or multi-factor strategy.

[Callout word in:] Single-factor ETFs should attribute significant weighting to the targeted factor, like size, and they may help investors focus on a specific outcome, such as improving potential returns, reducing risk, or helping to generate income. [Callout word out:]

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The Invesco S&P 500® Equal Weight ETF (RSP)

Let’s look at an example using the size factor. [Callout word in:] The Invesco S&P 500® Equal Weight ETF is based on the S&P 500® Equal Weight Index, which equally weights the stocks in the S&P 500® Index. This approach results in an exposure that tilts toward smaller companies. When smaller companies outperform larger companies, investors have greater exposure to them in their portfolio versus a market-cap-weighted strategy, leading to potential outperformance. [Callout word out:]

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Multi-factor strategy

On the other hand, [Callout word in:] multi-factor ETFs blend two or more factors to achieve desired outcomes. [Callout word out:]

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Invesco S&P 500 QVM Multifactor ETF (QVML)

For example, the [Callout word in:] Invesco S&P 500 QVM Multifactor ETF incorporates quality, value, and momentum to possibly provide a range of potential benefits to investors’ portfolios, including increased diversification and improved risk-adjusted returns. [Callout word out:]

In summary, as we continue to see a few large companies dominate market-capitalization-weighted investments, smart beta investing may offer investors an alternative weighting strategy to reduce concentration risk and better diversify their equity exposures.

Learn more about smart beta investing and ETFs in the featured products and resources section below this video.

Before investing, investors should carefully read the prospectus/summary prospectus and carefully consider the investment objectives, risks, charges, and expenses. For this and more complete information about the Fund call 800-983-0903 or visit invesco.com for the prospectus/summary prospectus.

Important information 

Source: Invesco, The Evolving Use of Equity Factor ETFs, May 2024

Diversification does not guarantee a profit or eliminate the risk of loss.

There are risks involved with investing in ETFs, including possible loss of money. Shares are not actively managed and are subject to risks similar to those of stocks, including those regarding short selling and margin maintenance requirements. Ordinary brokerage commissions apply. The Fund's return may not match the return of the Underlying Index. The Fund is subject to certain other risks. Please see the current prospectus for more information regarding the risk associated with an investment in the Fund.

Investments focused in a particular industry or sector, are subject to greater risk, and are more greatly impacted by market volatility, than more diversified investments.

Stocks of medium-sized companies tend to be more vulnerable to adverse developments, may be more volatile, and may be illiquid or restricted as to resale.

The Global Industry Classification Standard was developed by and is the exclusive property and a service mark of MSCI, Inc. and Standard & Poor's.

"Standard & Poor’s," "S&P" and "S&P 500," are trademarks of Standard & Poor’s Financial Services, LLC and have been licensed for use by Invesco Capital Management LLC and its affiliates. Invesco S&P 500® Equal Weight ETF is not sponsored, endorsed, sold or promoted by Standard & Poor’s makes no representation regarding the advisability of investing in Invesco S&P 500® Equal Weight ETF.

The Underlying Index, and thus the Fund, seeks to achieve specific factor exposures to securities in the Parent Index, as identified in the Fund’s principal investment strategies. There can be no assurance that targeting exposure to such factors will enhance the Fund’s performance over time and targeting exposure to certain factors may detract from performance in some market environments. There is no guarantee the Underlying Index methodology will achieve the specific factor exposures identified.

Companies that issue quality stocks may experience lower than expected returns or may experience negative growth, as well as increased leverage, resulting in lower than expected or negative returns to Fund shareholders.

A value style of investing is subject to the risk that the valuations never improve or that the returns will trail other styles of investing or the overall stock markets.

Momentum style of investing is subject to the risk that the securities may be more volatile than the market as a whole or returns on securities that have previously exhibited price momentum are less than returns on other styles of investing.

Investments focused in a particular sector, such as information technology, are subject to greater risk, and are more greatly impacted by market volatility, than more diversified investments.

The Fund is non-diversified and may experience greater volatility than a more diversified investment.

An investment cannot be made into an index.

S&P® is a registered trademark of Standard & Poor's Financial Services LLC (S&P) and Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC (Dow Jones). These trademarks have been licensed for use by S&P Dow Jones Indices LLC. S&P® and Standard & Poor's® are trademarks of S&P and Dow Jones® is a trademark of Dow Jones. These trademarks have been sublicensed for certain purposes by Invesco Capital Management LLC. The Index is a product of S&P Dow Jones Indices LLC and/or its affiliates and has been licensed for use by Invesco. The Fund is not sponsored, endorsed, sold or promoted by S&P Dow Jones Indices LLC, Dow Jones, S&P or their respective affiliates and neither S&P Dow Jones Indices LLC, Dow Jones, S&P or their respective affiliates make any representation regarding the advisability of investing in such product(s).

Not a Deposit    Not FDIC Insured    Not Guaranteed by the Bank    May Lose Value    Not Insured by any Federal Government Agency

Past performance is not a guarantee of future results. An investment cannot be made into an index.

This does not constitute a recommendation of any investment strategy or product for a particular investor. Investors should consult a financial professional before making any investment decisions.

The opinions expressed are those of Invesco, are based on current market conditions and are subject to change without notice. These opinions may differ from those of other Invesco investment professionals.

Since ordinary brokerage commissions apply for each ETF buy and sell transaction, frequent trading activity may increase the cost of ETFs.

Most ETFs disclose their portfolio holdings daily.

Shares are not individually redeemable, and owners of the Shares may acquire those Shares from the Fund and tender those Shares for redemption to the Fund in Creation Unit aggregations only, typically consisting of 10,000, 20,000, 25,000, 50,000, 75,000, 80,000, 100,000, or 150,000 Shares.

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