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

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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 $2.50 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

Large cap companies typically have a market capitalization above $10 billion. Considered a more stable option, large cap companies boast more predictable cash flows and are less volatile than their mid and small cap counterparts.

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%, making it one of the cheaper products in the space.

It has a 12-month trailing dividend yield of 0.96%.

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 39.80% of the portfolio. Telecom and Consumer Discretionary round out the top three.

Looking at individual holdings, Microsoft Corp (MSFT) accounts for about 11.65% of total assets, followed by Apple Inc (AAPL) and Amazon.com Inc (AMZN).

The top 10 holdings account for about 53.26% 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 has lost about -3.36% so far this year and it’s up approximately 26.85% in the last one year (as of 01/11/2022). In the past 52-week period, it has traded between $281.49 and $373.67.

The ETF has a beta of 0.98 and standard deviation of 21.88% for the trailing three-year period, making it a medium risk choice in the space. With about 52 holdings, it effectively diversifies company-specific risk.

Alternatives

Invesco S&P 500 Top 50 ETF holds a Zacks ETF Rank of 2 (Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, XLG is a great option for investors seeking exposure to the Style Box – Large Cap Blend segment of the market. There are other additional ETFs in the space that investors could consider as well.

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 $328.18 billion in assets, SPDR S&P 500 ETF has $447.88 billion. IVV has an expense ratio of 0.03% and SPY charges 0.09%.

Bottom-Line

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.

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