You may not be as diversified as you think
Explore two ways to get exposure to more of the stock market’s possibilities: Invesco S&P 500 Equal Weight ETF (RSP) and Invesco Discovery Mid Cap Growth Fund (OEGYX).
Are you taking unintended portfolio risks?
A handful of companies have driven the past returns of the S&P 500 Index — and therefore represent an outsized portion of the index today. That’s a situation known as market concentration.
If all of your stock investments are in market-cap-weighted strategies like the S&P 500, your equity portfolio may not be as diversified as you think — exposing you to unintended portfolio risk when the tides turn.
Break your
concentration with
RSP and OEGYX
Invesco can help you break your concentration in two different ways. RSP to maintain equal exposure to every stock in the S&P 500, and OEGYX to broaden your stock portfolio with mid-cap companies.
RSP
Maintain equal exposure to every stock in the S&P 500
The next big thing might not look so big today
The smallest 50 companies in the S&P 500 are about 1% of the index. But from 2004 through 2023, the smallest 50 provided about 4% higher return than the largest 501.
In an equal weight portfolio, you would have the same exposure to all 500 companies.
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Diversify with an equal weight approach
RSP removes concentration risk by investing equally in all 500 stocks of the S&P 500. This means you’re rarely underexposed to the market’s opportunities.
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What’s the right spot for RSP in a portfolio?
Wondering how an equal weight strategy can fit in with your existing holdings? RSP can be used to diversify a market cap-weighted core equity strategy. And it can complement large-cap growth equity strategies by offering greater exposure to the smaller companies within the S&P 500.
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OEGYX
Invest in another level of possibility
Mid caps may be the sweet spot of investing
Mid caps combine some of the best features of large and small companies. They typically grow faster than larger, more mature businesses but experience less volatility than small, unseasoned start-ups.
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Investors are underexposured to mid caps
Many investors are underexposed to mid-cap stocks, which may lead them to miss out on this potentially attractive area of the market. Mid caps make up 21% of US equity market cap but only 10% of US equity investor assets.3
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Mid caps have an attractive return profile
Since the inception of the Russell Midcap Index, mid caps have had higher returns than large caps with less risk than small caps. OEGYX is designed to invest in premier mid-cap growth companies.4
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Frequently asked questions
RSP tracks the S&P 500 Equal Weight Index, which consists of the same companies within the market cap-weighted S&P 500 Index but equally weights them (each company has the same weight of 0.20%). The underlying index and fund rebalance quarterly and reconstitute yearly.
RSP is a unique equal weight strategy that has 75% lower management fees than its peers and hasn’t paid a capital gains distribution since its inception in 2003.²
Market cap strategies can overweight the largest companies and underweight the smallest companies. An equal weight strategy provides equal exposure to both types of 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.
The team also manages a small-cap portfolio, and it draws on high-conviction ideas from that portfolio to potentially identify mid-cap opportunities early. It follows a rigorous risk management process and sell discipline, seeking to provide downside risk mitigation and outperform the benchmark.
Footnotes
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1
Source: Bloomberg L.P., as of 12/31/23. From 12/31/03 through 12/31/23, the average annual performance of the largest 50 companies and the smallest 50 companies in the S&P 500 was 10.1% and 14.1%, respectively.
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2
Lipper, Bloomberg, as of June 30, 2024. Total expense ratio of 0.20% represented for RSP. Lipper Multi-Cap Value Funds Classification median expense ratio is based on open-end, no-load mutual funds and ETFs; excludes funds of funds. An investment cannot be made directly into an index. ETFs generally have lower expenses than actively managed mutual funds due to their different management styles. Most ETFs are passively managed and are structured to track an index, whereas many mutual funds are actively managed and thus have higher management fees. Unlike ETFs, actively managed mutual funds have the ability to react to market changes and the potential to outperform a stated benchmark. ETFs can be traded throughout the day, whereas mutual funds are traded only once a day. While extreme market conditions could result in illiquidity for ETFs, typically they are still more liquid than most mutual funds because they trade on exchanges. While it is not Invesco’s intention, there is no guarantee that the Funds will not distribute capital gains to its shareholders. Capital gains source: Lipper, Bloomberg, as of June 30, 2024. Lipper Multi-Cap Value Funds Classification average annualized capital gains rate (%NAV) are based on open end, no-load mutual funds and ETFs; excludes funds of funds.
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3
Source: FactSet Research Systems Inc. and Morningstar. Data as of 6/30/24
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4
Source: Morningstar, as of 6/30/24. Based on annualized returns and standard deviation since the Russell Midcap Index inception on 11/1/91 through 6/30/24. Annualized returns were 11.04% for mid caps, 10.61% for large caps, and 9.13% for small caps. Standard deviation was 19.42% for small caps, 16.62% for mid caps and 15.06% for large caps. Large caps are represented by the Russell 1000 Index, and small caps are represented by the Russell 2000 Index. An investment cannot be made directly into an index. Past performance does not guarantee future results.
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While it is not Invesco's intention, there is no guarantee that the Funds will not distribute capital gains to its shareholders.
Since ordinary brokerage commissions apply for each ETF buy and sell transaction, frequent trading activity may increase the cost of ETFs.
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.
Although it is not Invesco's intention, there is no guarantee the Fund will not pay a capital gain.
As with any comparisons, Financial Professionals should be aware of the material differences between Mutual Funds and ETFs. Most ETFs are passively managed, whereas most mutual funds are actively managed. Other differences include, but are not limited to, expenses, management style and liquidity. Financial professionals should make their investors aware of these differences before investing.
