Should Invesco S&P SmallCap 600 Pure Value ETF (RZV) Be on Your Investing Radar?

The Invesco S&P SmallCap 600 Pure Value ETF (RZV - Free Report) was established on March 1, 2006, as a passively managed exchange-traded fund aimed at providing extensive exposure to the Small Cap Value segment of the U.S. equity market.

This fund is managed by Invesco and currently oversees assets exceeding $271.34 million, positioning it as an average-sized ETF targeting the Small Cap Value category in the U.S. equity market.

Why Invest in Small Cap Value?

Investing in small-cap companies often comes with higher potential rewards but also increased risks, as these companies generally have market capitalizations below $2 billion. Value stocks, characterized by lower than average price-to-earnings and price-to-book ratios, often exhibit slower sales and earnings growth compared to their growth stock counterparts. Historically, value stocks have outperformed growth stocks when looking at long-term performance; however, during periods of strong market growth, growth stocks typically outperform value stocks.

Cost Considerations

Understanding the cost structure of an ETF is crucial, as expense ratios can greatly impact long-term returns. The annual operating expenses for RZV are 0.35%, which is on par with many of its peers in the same category. Additionally, this ETF offers a 12-month trailing dividend yield of 1.04%.

Sector Distribution and Key Holdings

Before investing, it’s essential to explore an ETF’s holdings, despite the advantages they offer in terms of diversified exposure that reduces individual stock risk. Most ETFs have a high level of transparency and reveal their holdings daily.

The RZV ETF primarily invests in the Financial sector, which makes up about 22.80% of its portfolio. Following this, the Industrials and Consumer Discretionary sectors represent the next largest allocations.

Among its individual holdings, Echostar Corp (SATS - Free Report) constitutes approximately 2.27% of the total fund assets, with Phinia Inc (PHIN - Free Report) and Fresh Del Monte Produce Inc (FDP - Free Report) also represented. The top ten holdings collectively account for around 19.29% of the ETF's total assets under management.

Performance and Risk Analysis

The Invesco S&P SmallCap 600 Pure Value ETF targets the performance of the S&P SmallCap 600 Pure Value Index before accounting for fees and expenses. This index includes securities that demonstrate strong value characteristics within the S&P SmallCap 600 Index.

So far in 2024, the ETF has returned approximately 11.09% and shows a one-year increase of around 21.07% as of December 11, 2024. Over the past 52-week period, its trading range has fluctuated between $96.80 and $119.36.

With a beta of 1.43 and a standard deviation of 24.23% over the last three years, this ETF is considered a high-risk investment in its category, although it holds about 137 different stocks, which helps mitigate individual stock risk.

Alternative Investment Options

The Invesco S&P SmallCap 600 Pure Value ETF is rated a Zacks ETF Rank of 3 (Hold), based on several factors including expected returns for the asset class, expense ratio, and overall momentum. This rating indicates RZV may be a beneficial choice for those seeking investment in the Small Cap Value segment of the market. Still, investors should explore other ETF options in this sector.

For example, both the Avantis U.S. Small Cap Value ETF (AVUV - Free Report) and the Vanguard Small-Cap Value ETF (VBR - Free Report) track similar indices. The Avantis U.S. Small Cap Value ETF boasts $15.99 billion in assets, while the Vanguard Small-Cap Value ETF has $32.65 billion under management. Notably, AVUV comes with an expense ratio of 0.25%, whereas VBR charges only 0.07%.

Final Thoughts

As more retail and institutional investors gravitate toward passively managed ETFs, they recognize the benefits of low costs, transparency, flexibility, and tax efficiency these funds generally provide. Investments in these ETFs can also serve as solid vehicles for long-term investing strategies.

To explore more details about this ETF and others, look for products that align with your investment goals, and stay informed through articles discussing new developments in the ETF investment landscape.

ETF, Investing, Finance