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Is Invesco S&P MidCap 400 Pure Growth ETF (RFG) a Strong ETF Right Now?

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A smart beta exchange traded fund, the Invesco S&P MidCap 400 Pure Growth ETF (RFG - Free Report) debuted on 03/01/2006, and offers broad exposure to the Style Box - Mid Cap Growth category of the market.

What Are Smart Beta ETFs?

For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.

Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.

If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking non-cap weighted strategies.

Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.

While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.

Fund Sponsor & Index

The fund is sponsored by Invesco. It has amassed assets over $259.59 million, making it one of the average sized ETFs in the Style Box - Mid Cap Growth. Before fees and expenses, this particular fund seeks to match the performance of the S&P MidCap 400 Pure Growth Index.

The S&P MidCap 400 Pure Growth Index measures the performance of securities that exhibit strong growth characteristics in the S&P MidCap 400 Index.

Cost & Other Expenses

Expense ratios are an important factor in the return of an ETF and in the long-term, cheaper funds can significantly outperform their more expensive cousins, other things remaining the same.

Operating expenses on an annual basis are 0.35% for this ETF, which makes it on par with most peer products in the space.

RFG's 12-month trailing dividend yield is 0.96%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation in the Consumer Discretionary sector - about 23.50% of the portfolio. Industrials and Energy round out the top three.

Taking into account individual holdings, Southwestern Energy Co (SWN - Free Report) accounts for about 2.48% of the fund's total assets, followed by Super Micro Computer Inc (SMCI - Free Report) and Cnx Resources Corp (CNX - Free Report) .

Its top 10 holdings account for approximately 20.72% of RFG's total assets under management.

Performance and Risk

Year-to-date, the Invesco S&P MidCap 400 Pure Growth ETF has added roughly 2.30% so far, and was up about 12.59% over the last 12 months (as of 01/30/2024). RFG has traded between $34.48 and $42.21 in this past 52-week period.

The fund has a beta of 1.13 and standard deviation of 23.82% for the trailing three-year period, which makes RFG a medium risk choice in this particular space. With about 81 holdings, it effectively diversifies company-specific risk.

Alternatives

Invesco S&P MidCap 400 Pure Growth ETF is an excellent option for investors seeking to outperform the Style Box - Mid Cap Growth segment of the market. There are other ETFs in the space which investors could consider as well.

Vanguard Mid-Cap Growth ETF (VOT - Free Report) tracks CRSP U.S. Mid Cap Growth Index and the iShares Russell Mid-Cap Growth ETF (IWP - Free Report) tracks Russell MidCap Growth Index. Vanguard Mid-Cap Growth ETF has $11.92 billion in assets, iShares Russell Mid-Cap Growth ETF has $14.43 billion. VOT has an expense ratio of 0.07% and IWP charges 0.23%.

Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box - Mid Cap Growth.

Bottom Line

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.

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