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Is Invesco FTSE RAFI Emerging Markets ETF (PXH) a Strong ETF Right Now?

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Launched on 09/27/2007, the Invesco FTSE RAFI Emerging Markets ETF (PXH - Free Report) is a smart beta exchange traded fund offering broad exposure to the Broad Emerging Market ETFs category of the market.

What Are Smart Beta ETFs?

Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.

Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.

There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.

Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other such characteristics.

This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.

Fund Sponsor & Index

The fund is managed by Invesco. PXH has been able to amass assets over $1.18 billion, making it one of the larger ETFs in the Broad Emerging Market ETFs. This particular fund, before fees and expenses, seeks to match the performance of the FTSE RAFI Emerging Markets Index.

The FTSE RAFI Emerging Index is designed to track the performance of the emerging market stocks with the highest ranking cumulative score, selected from the constituents of the FTSE Emerging Large/Mid Cap Index.

Cost & Other Expenses

Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.

Annual operating expenses for PXH are 0.49%, which makes it on par with most peer products in the space.

It's 12-month trailing dividend yield comes in at 4.48%.

Sector Exposure and Top Holdings

While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

Looking at individual holdings, Taiwan Semiconductor Manufacturing Co Ltd accounts for about 6.13% of total assets, followed by Alibaba Group Holding Ltd and Tencent Holdings Ltd.

Its top 10 holdings account for approximately 28.1% of PXH's total assets under management.

Performance and Risk

The ETF has added roughly 6.73% and is up about 7.54% so far this year and in the past one year (as of 07/29/2024), respectively. PXH has traded between $17.24 and $21.43 during this last 52-week period.

The fund has a beta of 0.74 and standard deviation of 17.04% for the trailing three-year period, which makes PXH a medium risk choice in this particular space. With about 413 holdings, it effectively diversifies company-specific risk.

Alternatives

Invesco FTSE RAFI Emerging Markets ETF is a reasonable option for investors seeking to outperform the Broad Emerging Market ETFs segment of the market. However, there are other ETFs in the space which investors could consider.

Vanguard FTSE Emerging Markets ETF (VWO - Free Report) tracks FTSE Emerging Markets All Cap China A Inclusion Index and the iShares Core MSCI Emerging Markets ETF (IEMG - Free Report) tracks MSCI Emerging Markets Investable Market Index. Vanguard FTSE Emerging Markets ETF has $78.63 billion in assets, iShares Core MSCI Emerging Markets ETF has $78.62 billion. VWO has an expense ratio of 0.08% and IEMG charges 0.09%.

Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Broad Emerging Market ETFs.

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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