Is Guggenheim S&P 500 Equal Weight Industrials ETF (RGI) a Hot ETF Right Now?

Designed to provide broad exposure to the Industrials ETFs category of the U.S. equity market, the Guggenheim S&P 500 Equal Weight Industrials ETF (RGI) is a smart beta exchange traded fund launched on 11/01/2006.

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.

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.

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.

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

Because the fund has amassed over $307.48 M, this makes it one of the average sized ETFs in the Industrials ETFs. RGI is managed by Invesco Powershares. RGI seeks to match the performance of the S&P 500 Equal Weight Industrials Index before fees and expenses.

This index is an unmanaged equal weighted version of the S&P 500 Industrials Index that consists of the common stocks of the following industries: aerospace & defense, building products, construction & engineering, electrical equipment, conglomerates, machinery; commercial services & supplies, air freight & logistics, airlines, marine, road & rail transportation infrastructure.

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 0.40% for this ETF, which makes it on par with most peer products in the space.

RGI's 12-month trailing dividend yield is 1.17%.

Sector Exposure and Top Holdings

It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

Representing 100% of the portfolio, the fund has heaviest allocation to the Industrials sector.

Taking into account individual holdings, Transdigm Group Inc (TDG) accounts for about 1.57% of the fund's total assets, followed by Ww Grainger Inc (GWW) and Harris Corp (HRS).

RGI's top 10 holdings account for about 15.26% of its total assets under management.

Performance and Risk

RGI has added roughly 0.21% so far this year, and as of 04/18/2018, is up about 18.09% in the last one year. In the past 52-week period, the fund has traded between $102.86 and $127.83.

RGI has a beta of 1.09 and standard deviation of 14.80% for the trailing three-year period, which makes the fund a medium choice in the space. With about 70 holdings, it effectively diversifies company-specific risk.

Alternatives

Guggenheim S&P 500 Equal Weight Industrials ETF is an excellent option for investors seeking to outperform the Industrials ETFs segment of the market. There are other ETFs in the space which investors could consider as well.

Vanguard Industrials ETF (VIS) tracks MSCI US Investable Market Industrials 25/50 Index and the Industrial Select Sector SPDR Fund (XLI) tracks Industrial Select Sector Index. Vanguard Industrials ETF has $3.80 B in assets, Industrial Select Sector SPDR Fund has $12.79 B. VIS has an expense ratio of 0.10% and XLI charges 0.13%.

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