Commodities and Gold

Escape Inflation’s Grip with This Equal Weight Materials ETF

While hope for many investors remains pinned to a strong economic recovery from the damage wrought by the COVID-19 pandemic, the specter of inflation surfacing has thus far remained in the background.

After all, inflation has remained low for many years and many people’s memories of the effects of this economic phenomenon have grown dim with the passage of time. However, some market analysts, including Moody’s Analytics Mark Zandi, have started to sound the alarm.

With the pandemic starting to wind down, the arrival of a new stimulus package and the presence of pent-up demand, these individuals have argued that the coming months will see a sudden surge of demand and spending on the part of consumers that the market is unprepared to receive. Not surprisingly, this grim news has led some investors to search for safe havens in which to park their funds.

One such source may be the Invesco S&P 500 Equal Weight Materials Exchange Traded Fund (ETF) (NYSEARCA: RTM). RTM tracks an index of American materials companies. Interestingly, the fund’s managers use an equal-weighting strategy to assemble this ETF’s portfolio. While this decision favors mid-caps over both industrial giants and smaller public companies, a side effect is that the portfolio’s volatility remains stable.

Some of this fund’s top holdings include Freeport-McMoRan Inc. (NYSE: FCX), Mosaic Company (NYSE: MOS), CF Industries Holdings, Inc. (NYSE: CF), Martin Marietta Materials, Inc. (NYSE: MLM), LyondellBasell Industries NV (NYSE: LYB), Avery Dennison Corporation (NYSE: AVY), WestRock Company (NYSE: WRK) and Vulcan Materials Company (NYSE: VMC).

This fund’s performance has been relatively strong, even when including the damage done by the COVID-19 pandemic. As of March 9, RTM has been up 5.84% over the past month and up 10.27% for the past three months. It is currently up 9.80% year to date.

Chart courtesy of www.stockcharts.com

The fund has amassed $589.28 million in assets under management and has an expense ratio of 0.40%.

In short, while RTM does provide an investor with a chance to avert the effects of inflation, this kind of ETF may not be appropriate for all portfolios. Thus, interested investors always should conduct their due diligence and decide whether the fund is suitable for their investing goals.

As always, I am happy to answer any of your questions about ETFs, so do not hesitate to send me an email. You just may see your question answered in a future ETF Talk.

Jim Woods

Jim Woods is a 20-plus-year veteran of the markets with varied experience as a broker, hedge fund trader, financial writer, author and newsletter editor. Jim is the editor of Intelligence Report, Investing Edge, the Bullseye Stock Trader, and The Deep Woods (formerly the Weekly ETF Report). His books include co-authoring, “Billion Dollar Green: Profit from the Eco Revolution,” and “The Wealth Shield: How to Invest and Protect Your Money from Another Stock Market Crash, Financial Crisis or Global Economic Collapse.” He’s also ghostwritten many books and articles, as well as edited content for some of the investment industry’s biggest luminaries. His articles have appeared on many leading financial websites, including StockInvestor.com, InvestorPlace.com, Main Street Investor, MarketWatch, Street Authority, Human Events and many others. Jim formerly worked with Investor’s Business Daily founder William J. O’Neil, helping to author training courses in the CANSLIM stock-picking methodology. The independent firm TipRanks rates Jim the No. 3 financial blogger in the world (out of more than 6,000). TipRanks calculates that, since 2012, he's made 361 successful recommendations out of 499 total, earning a success rate of 72% and a +15.3% average return per recommendation. He is known in professional and personal circles as “The Renaissance Man,” because his expertise includes such varied fields as composing and performing music; Western horsemanship, combat marksmanship, martial arts, auto racing and bodybuilding. Jim holds a BA in philosophy from the University of California, Los Angeles, and is a former U.S. Army paratrooper. A self-described “radical for capitalism,” he celebrates the virtue of making money from his Southern California horse ranch.