The Invesco S&P MidCap 400 Pure Growth ETF (RFG) was launched on 03/01/2006, and is a passively managed exchange traded fund designed to offer broad exposure to the Mid Cap Growth segment of the US equity market.
The fund is sponsored by Invesco. It has amassed assets over $421.13 million, making it one of the average sized ETFs attempting to match the Mid Cap Growth segment of the US equity market.
Why Mid Cap Growth
Mid cap companies have market capitalization between $2 billion and $10 billion. They usually have higher growth prospects than large cap companies and are less volatile than small cap companies. Thus they have a nice balance of growth potential and stability.
While growth stocks do boast higher than average sales and earnings growth rates, and they are expected to grow faster than the wider market, investors should note these kinds of stocks have higher valuations. Something to keep in mind is the higher level of volatility that is affiliated with growth stocks. Compared to value stocks, growth stocks are a safer bet in a strong bull market, but don’t perform as strongly in almost all other financial environments.
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 counterparts, other things remaining the same.
Annual operating expenses for this ETF are 0.35%, putting it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 0.05%.
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 to the Consumer Discretionary sector–about 24.30% of the portfolio. Information Technology and Healthcare round out the top three.
Looking at individual holdings, Digital Turbine Inc (APPS) accounts for about 3.35% of total assets, followed by Repligen Corp (RGEN) and Rh (RH).
The top 10 holdings account for about 25.25% of total assets under management.
Performance and Risk
RFG seeks to match the performance of the S&P MidCap 400 Pure Growth Index before fees and expenses. The S&P Midcap 400 Pure Growth Index is narrow in focus, containing only those S&P MidCap 400 companies with strong growth characteristics as selected by S&P. As of December 31, 2010, the S&P MidCap 400 Pure Growth Index included 104 of the constituents that comprise the S&P MidCap 400.
The ETF has added about 21.58% so far this year and is up roughly 29.03% in the last one year (as of 11/18/2021). In the past 52-week period, it has traded between $188.71 and $245.79.
The ETF has a beta of 1.17 and standard deviation of 27.89% for the trailing three-year period, making it a medium risk choice in the space. With about 83 holdings, it effectively diversifies company-specific risk.
Invesco S&P MidCap 400 Pure Growth ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, RFG is a reasonable option for those seeking exposure to the Style Box – Mid Cap Growth area of the market. Investors might also want to consider some other ETF options in the space.
The Vanguard MidCap Growth ETF (VOT) and the iShares Russell MidCap Growth ETF (IWP) track a similar index. While Vanguard MidCap Growth ETF has $12.79 billion in assets, iShares Russell MidCap Growth ETF has $17 billion. VOT has an expense ratio of 0.07% and IWP charges 0.23%.
An increasingly popular option among retail and institutional investors, passively managed ETFs offer low costs, transparency, flexibility, and tax efficiency; they are also excellent vehicles for long term investors.
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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