Bargain-priced shares in small companies have been on a tear lately. The S&P SmallCap 600 Value Index has climbed 72% over the past 12 months. Invesco S&P SmallCap 600 Revenue ETF (RWJ) has done even better, gaining 113%.
The exchange-traded fund's (ETF) holdings are weighted by revenues, rather than market value, which helps to "exploit the concept of buy low, sell high," says Invesco's Nick Kalivas.
No matter the reason that stocks run up in price, every three months the fund rebalances based on revenue. That shields the ETF some from fad investing trends. For example, after gaining more than 5,000% over the past 12 months, GameStop (GME) is the top holding of the fund's parent index, the market-value-weighted S&P SmallCap 600. In the ETF, GameStop ranks 30th.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
The fund is well positioned for economic growth. Consumer discretionary companies – makers of nonessential consumer goods and services – compose 27% of the fund’s assets, which is 12 percentage points more than its typical peer.
Some consumer discretionary stocks, including Macy's (M), a top-10 holding in the ETF, have logged triple-digit gains over the past year. Still, BofA Global Securities strategist Jill Carey Hall counts consumer discretionary as one of her favorite sectors these days. And small-company stocks "look inexpensive" next to large companies, she says.
This ETF is high on returns and high on volatility. It boasts a three-year, 20.1% annualized return that beat 99% of its peers.
-
Here's How To Get Organized And Work For YourselfWhether you’re looking for a side gig or planning to start your own business, it has never been easier to strike out on your own. Here is our guide to navigating working for yourself.
-
How to Manage Risk With Diversification"Don't put all your eggs in one basket" means different things to different investors. Here's how to manage your risk with portfolio diversification.
-
Bond Basics: Zero-Coupon Bondsinvesting These investments are attractive only to a select few. Find out if they're right for you.
-
Bond Basics: How to Reduce the Risksinvesting Bonds have risks you won't find in other types of investments. Find out how to spot risky bonds and how to avoid them.
-
What's the Difference Between a Bond's Price and Value?bonds Bonds are complex. Learning about how to trade them is as important as why to trade them.
-
Bond Basics: U.S. Agency Bondsinvesting These investments are close enough to government bonds in terms of safety, but make sure you're aware of the risks.
-
Bond Ratings and What They Meaninvesting Bond ratings assess the creditworthiness of your bond issuer, can help limit your risk of default and maximize yield.
-
Bond Basics: U.S. Savings Bondsinvesting U.S. savings bonds are a tax-advantaged way to save for higher education.
-
Bond Basics: Treasuriesinvesting Understand the different types of U.S. treasuries and how they work.
-
Bond Basics: Ownershipinvesting Bonds come in a variety of forms, but they all share these basic traits.
