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 Russell 1000® Dynamic Multifactor ETF (OMFL).
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 OMFL
Invesco can help you break your concentration through two low-cost, tax-efficient exchange-traded funds. RSP to maintain equal exposure to every stock in the S&P 500, and OMFL to position portfolios for changing possibilities.
RSP
Maintain equal exposure to every stock in the S&P 500
-
RSP product detailsThe 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.
Transcript
-
RSP product detailsDiversify 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.
Transcript
-
RSP product detailsWhat’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.
Transcript
OMFL
Positioning portfolios for changing possibilities
-
OMFL product detailsInvest for the future. Not the past.
OMFL shifts its holdings monthly to favor the types of stocks we expect to outperform based on today’s market environment — not yesterday’s.
We think positioning your portfolio for current opportunities is always a smart idea — but especially now, given high levels of market concentration.Transcript
-
OMFL product detailsDiversify using a multi-factor approach
Our proprietary framework incorporates more than 20 leading economic indicators to determine whether we are in a Recovery, Expansion, Slowdown, or Contraction environment.
We then allocate to the investment factors we expect to outperform in the current economic environment.
Transcript
-
OMFL product detailsHow can a multi-factor approach break your concentration?
Market concentration is often driven by past returns, so market-cap-weighted portfolios may be heavily weighted to the Momentum factor (which favors stocks with stronger past performance). OMFL can help break that concentration by allocating to multiple factors based on today’s economic outlook.
Transcript
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.
They are funds that provide exposure to specific characteristics of stocks, such as Value and Momentum, that may impact risk and return. Factor-based ETFs may be used to target specific outcomes, such as potentially higher returns or lower volatility. Multifactor ETFs, such as OMFL, combine several of these characteristics in a single strategy.
- Value: Equally weighted composite of cash flow yield, earnings yield, and price-to-sales ratio.
- Size: Based on total market capitalization as of the last business day of the prior month.
- Quality: Composite of profitability (return on assets, change in asset turnover and accruals) and a single measure of leverage.
- Low Volatility: Standard deviation weekly total returns over the trailing 5 years ending on the last business day of the prior month.
- Momentum: Historical return of the 11 months ending on the last business day of the prior month.
As of April 2024, the Momentum-driven “magnificent 7” stocks made up 29% of the S&P 500 Index. Our analysis shows that even if the current environment switched from Slowdown to Contraction (which would add Momentum stocks to the current allocation), the Magnificent 7 would be expected to represent about 15% of OMFL’s portfolio. (Sources: Bloomberg L.P., as of April 30, 2024, and Invesco analysis.)
Footnotes
-
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.
-
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.
NA3661713
OMFL holdings. Holdings are subject to change and are not buy/sell recommendations.
The Invesco Russell 1000® Dynamic Multifactor ETF seeks to track the investment results (before fees and expenses) of the Russell 1000® Invesco Dynamic Multifactor Index.
Recovery: Growth is below trend and accelerating. Expansion: Growth is above trend and accelerating. Slowdown: Growth is above trend and decelerating. Contraction: Growth is below trend and decelerating.
Factor investing is an investment strategy in which securities are chosen based on certain characteristics and attributes. There is no assurance that targeting exposure to certain factors will enhance the performance over time, and targeting exposure to certain factors may detract from performance in some market environments. There are no guarantees the specific factor exposures will be achieved.
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.
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.
While it is not Invesco's intention, there is no guarantee that the Funds will not distribute capital gains to its shareholders.
The Magnificent Seven stocks are a group of high-performing and influential companies in the U.S. stock market: Alphabet, Amazon, Apple, Meta Platforms, Microsoft, NVIDIA, and Tesla.
Since ordinary brokerage commissions apply for each ETF buy and sell transaction, frequent trading activity may increase the cost of ETFs.
There is no guarantee that the Fund's income will be exempt from federal and state income taxes.
Invesco does not offer tax advice. Please consult your own tax professional for information regarding your personal tax situation.
