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 launched on March 1, 2006. This ETF aims to provide broad exposure to the Small Cap Value segment of the U.S. equity market and is passively managed.

The fund is managed by Invesco and has grown to hold assets exceeding $271.34 million, which positions it among the average-sized ETFs catering to the Small Cap Value segment in the U.S. stock market.

Why Small Cap Value?

Investing in small-cap companies, which are defined as those with a market capitalization of less than $2 billion, comes with the potential for higher rewards but also increased risks. These companies often exhibit lower price-to-earnings (P/E) and price-to-book (P/B) ratios compared to larger firms. However, they also tend to show lower sales and earnings growth rates.

Historically, value stocks have outperformed growth stocks over the long term. Still, during strong bull markets, growth stocks may deliver higher returns than their value counterparts.

Costs

One critical aspect that affects an ETF's returns is its expense ratio. Lower expenses can lead to better long-term performance, provided everything else remains equal. For the Invesco S&P SmallCap 600 Pure Value ETF, the annual operating expenses stand at 0.35%, a rate comparable to many of its peers in the Small Cap Value space.

Additionally, the ETF has a 12-month trailing dividend yield of 1.04%.

Sector Exposure and Top Holdings

Before making an investment in any ETF, it's vital to review its holdings to understand its risk profile, despite the benefits of diversification that ETFs offer. Most ETFs are transparent about their holdings, often providing daily updates.

The Invesco S&P SmallCap 600 Pure Value ETF has its largest allocation in the Financials sector, accounting for about 22.80% of the total portfolio. Industrials and Consumer Discretionary sectors follow closely behind as the second and third-largest allocations.

Examining individual holdings reveals that Echostar Corp (SATS - Free Report) makes up approximately 2.27% of the total fund, while Phinia Inc (PHIN - Free Report) and Fresh Del Monte Produce Inc (FDP - Free Report) also feature prominently. The top ten holdings collectively represent roughly 19.29% of the total assets under management.

Performance and Risk

The ETF's goal is to replicate the performance of the S&P SmallCap 600 Pure Value Index, which focuses on securities recognized for their strong value characteristics from the larger S&P SmallCap 600 Index. So far this year, RZV has returned about 11.09% and increased approximately 21.07% over the past year (as of December 11, 2024). In the past 52 weeks, the ETF's price has fluctuated between $96.80 and $119.36.

It holds a beta of 1.43, indicating higher volatility compared to the overall market, and has a standard deviation of 24.23% over the trailing three-year period, categorizing it as a high-risk investment. However, with a total of about 137 holdings, it diversifies company-specific risks effectively.

Alternatives

The Invesco S&P SmallCap 600 Pure Value ETF is rated as a Zacks ETF Rank of 3 (Hold). This rating takes into account expected asset class returns, expense ratios, momentum, and other relevant factors. Therefore, RZV can be a suitable choice for investors seeking exposure to the Small Cap Value segment.

For those considering other options, the Avantis U.S. Small Cap Value ETF (AVUV - Free Report) and the Vanguard Small-Cap Value ETF (VBR - Free Report) are worth exploring. The Avantis ETF manages about $15.99 billion in assets, while Vanguard has roughly $32.65 billion. The expense ratio for AVUV is 0.25%, whereas VBR's is notably lower at 0.07%.

Bottom Line

As more retail and institutional investors turn toward passively managed ETFs for their lower costs, transparency, flexibility, and tax efficiency, these funds have become excellent vehicles for long-term investors. For thorough information regarding this product and other ETF options, investors should consider conducting a detailed search that aligns with their investment objectives and keep abreast of the latest developments in the world of ETFs.

ETF, Investment, Sector