Should Invesco S&P 500 Top 50 ETF (XLG) Be on Your Investing Radar?

Designed to provide broad exposure to the Large Cap Blend segment of the US equity market, the Invesco S&P 500 Top 50 ETF (XLG) is a passively managed exchange traded fund launched on 05/04/2005.

The fund is sponsored by Invesco. It has amassed assets over $3.79 billion, making it one of the larger ETFs attempting to match the Large Cap Blend segment of the US equity market.

Why Large Cap Blend

Companies that find themselves in the large cap category typically have a market capitalization above $10 billion. They tend to be stable companies with predictable cash flows and are usually less volatile than mid and small cap companies.

Blend ETFs usually hold a mix of growth and value stocks as well as stocks that exhibit both value and growth characteristics.

Costs

Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.

Annual operating expenses for this ETF are 0.20%, putting it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 0.89%.

Sector Exposure and Top Holdings

ETFs offer a diversified exposure and thus minimize single stock risk but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.

This ETF has heaviest allocation to the Information Technology sector--about 41.40% of the portfolio. Telecom and Healthcare round out the top three.

Looking at individual holdings, Apple Inc (AAPL) accounts for about 12.72% of total assets, followed by Microsoft Corp (MSFT) and Amazon.com Inc (AMZN).

The top 10 holdings account for about 54.89% of total assets under management.

Performance and Risk

XLG seeks to match the performance of the S&P 500 Top 50 ETF Index before fees and expenses. The S&P 500 Top 50 Index is composed of 50 of the largest companies in the S&P 500 Index.

The ETF return is roughly 9.52% so far this year and is up about 41.92% in the last one year (as of 02/26/2024). In the past 52-week period, it has traded between $28.56 and $41.36.

The ETF has a beta of 1 and standard deviation of 18.93% for the trailing three-year period, making it a medium risk choice in the space. With about 55 holdings, it effectively diversifies company-specific risk.

Alternatives

Invesco S&P 500 Top 50 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, XLG is a reasonable option for those seeking exposure to the Style Box - Large Cap Blend area of the market. Investors might also want to consider some other ETF options in the space.

The iShares Core S&P 500 ETF (IVV) and the SPDR S&P 500 ETF (SPY) track a similar index. While iShares Core S&P 500 ETF has $443.19 billion in assets, SPDR S&P 500 ETF has $499.56 billion. IVV has an expense ratio of 0.03% and SPY charges 0.09%.

Bottom-Line

Retail and institutional investors increasingly turn to passively managed ETFs because they offer low costs, transparency, flexibility, and tax efficiency; these kind of funds 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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Invesco S&P 500 Top 50 ETF (XLG): ETF Research Reports

Amazon.com, Inc. (AMZN) : Free Stock Analysis Report

Apple Inc. (AAPL) : Free Stock Analysis Report

Microsoft Corporation (MSFT) : Free Stock Analysis Report

SPDR S&P 500 ETF (SPY): ETF Research Reports

iShares Core S&P 500 ETF (IVV): ETF Research Reports

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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