U.S. Investing

Information Technology Fund Offers Growth Potential and Dividends

Technology will not fade away and the sector’s recent pullback may be setting up investors to buy at discounted prices before the next advance.

The Invesco S&P 500 Equal Weight Technology ETF (RYT) is intended to track the S&P 500 Equal Weight Information Technology Index. The fund aims to invest at least 90% of its total assets in securities that comprise the Index.

The Index offers the advantage of equally weighting stocks in the information technology sector of the S&P 500 Index. That approach avoids the problem of technology giants dominating the exposure and leaving investors vulnerable when such stocks retreat and carry a fund down with it.

With the equal-weighting strategy, the fund offers less risk to a handful of holdings serving as a heavy anchor on its returns. Another appeal is that the fund and the Index are rebalanced quarterly. Income investors will like that it pays a dividend and offers a decent yield of 0.68%. Many information technology stocks do not pay a dividend, since they typically use their capital for research and development, as well and growth-oriented initiatives, so the dividend offered with this one should not be overlooked and dismissed as a pittance.

The fund’s top 10 holdings feature ANSYS Inc., 1.43%; NXP Semiconductors NV, 1.42%; VeriSign Inc., 1.42%; Lam Research Corp., 1.41%; Citrix Systems Inc., 1.41%; Adobe Inc., 1.41%; Texas Instruments Inc., 1.40%; Broadcom Inc., 1.40%; Motorola Solutions Inc, 1.39%; and F5 Networks Inc., 1.39%.

The presence of all those stocks in a single investment offers diversified exposure in the information technology arena through the simplicity and ease of making a single investment. Who needs to complicate life when it is not necessary? There are so many better things to do in this world. Just ask the Renaissance Man!

The fund has a current price-to-earnings ratio of 24.37 and its return thus far in 2021 is 3.26%. However, it has zoomed 45.06% during the past year, so it is easy to see why investors like the growth potential that information technology equities can provide.

However, I urge interested investors to conduct their own due diligence to decide whether this fund fits their personal portfolio goals.

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.