Designed to provide broad exposure to the Technology - Software segment of the equity market, the Invesco Dynamic Software ETF (PSJ) is a passively managed exchange traded fund launched on 06/23/2005.
While an excellent vehicle for long term investors, passively managed ETFs are a popular choice among institutional and retail investors due to their low costs, transparency, flexibility, and tax efficiency.
Sector ETFs are also funds of convenience, offering many ways to gain low risk and diversified exposure to a broad group of companies in particular sectors. Technology - Software is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 10, placing it in bottom 38%.
The fund is sponsored by Invesco. It has amassed assets over $495.35 million, making it one of the average sized ETFs attempting to match the performance of the Technology - Software segment of the equity market. PSJ seeks to match the performance of the Dynamic Software Intellidex Index before fees and expenses.
The index is comprised of stocks of software companies. The Index is designed to provide capital appreciation by thoroughly evaluating companies based on a variety of investment merit criteria, including fundamental growth, stock valuation, investment timeliness and risk factors.
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 0.58%, making it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 0.09%.
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 in the Information Technology sector--about 62.80% of the portfolio. Telecom and Healthcare round out the top three.
Looking at individual holdings, Docusign Inc (DOCU) accounts for about 5.79% of total assets, followed by Snap Inc (SNAP) and Adobe Inc (ADBE).
The top 10 holdings account for about 47.53% of total assets under management.
Performance and Risk
So far this year, PSJ has added about 18.28%, and is up about 17.73% in the last one year (as of 07/20/2020). During this past 52-week period, the fund has traded between $74.11 and $121.60.
The ETF has a beta of 1.07 and standard deviation of 26.36% for the trailing three-year period, making it a high risk choice in the space. With about 32 holdings, it has more concentrated exposure than peers.
Invesco Dynamic Software ETF holds a Zacks ETF Rank of 1 (Strong Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, PSJ is an excellent option for investors seeking exposure to the Technology ETFs segment of the market. There are other additional ETFs in the space that investors could consider as well.
SPDR SP Software Services ETF (XSW) tracks S&P Software & Services Select Industry Index and the iShares Expanded TechSoftware Sector ETF (IGV) tracks S&P North American Technology-Software Index. SPDR SP Software Services ETF has $243.44 million in assets, iShares Expanded TechSoftware Sector ETF has $4.77 billion. XSW has an expense ratio of 0.35% and IGV charges 0.46%.
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 Dynamic Software ETF (PSJ): ETF Research Reports
Adobe Systems Incorporated (ADBE): Free Stock Analysis Report
SPDR SP Software Services ETF (XSW): ETF Research Reports
iShares Expanded TechSoftware Sector ETF (IGV): ETF Research Reports
Snap Inc. (SNAP): Free Stock Analysis Report
DocuSign Inc. (DOCU): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.