Should ALPS Equal Sector Weight ETF (EQL) Be on Your Investing Radar?

Designed to provide broad exposure to the Large Cap Blend segment of the US equity market, the ALPS Equal Sector Weight ETF (EQL) is a passively managed exchange traded fund launched on 07/07/2009.

The fund is sponsored by Alps. It has amassed assets over $331.53 million, making it one of the average sized ETFs attempting to match the Large Cap Blend segment of the US equity market.

Why Large Cap Blend

Companies that fall in the large cap category tend to 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 are aptly named, since they tend to hold a mix of growth and value stocks, as well as show characteristics of both kinds of equities.

Costs

When considering an ETF's total return, expense ratios are an important factor, and cheaper funds can significantly outperform their more expensive counterparts in the long term if all other factors remain equal.

Annual operating expenses for this ETF are 0.26%, putting it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 1.85%.

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.

Looking at individual holdings, Communication Services Select Sector Spdr Fund (XLC) accounts for about 9.64% of total assets, followed by Health Care Select Sector Spdr Fund (XLV) and Financial Select Sector Spdr Fund (XLF).

The top 10 holdings account for about 91.41% of total assets under management.

Performance and Risk

EQL seeks to match the performance of the NYSE Select Sector Equal Weight Index before fees and expenses. The NYSE Equal Sector Weight Index comprises of all active Select Sector SPDR ETFs in an equal weighted portfolio. These sector includes Consumer Discretionary, Consumer Staples, Materials, Energy, Technology, Utilities, Financial, Industrial, Health Care & Real Estate.

The ETF has added roughly 4.78% so far this year and it's up approximately 17.22% in the last one year (as of 04/26/2024). In the past 52-week period, it has traded between $96 and $117.99.

The ETF has a beta of 0.96 and standard deviation of 15.46% for the trailing three-year period, making it a medium risk choice in the space. With about 12 holdings, it has more concentrated exposure than peers.

Alternatives

ALPS Equal Sector Weight 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, EQL is a good 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 $434.90 billion in assets, SPDR S&P 500 ETF has $506.63 billion. IVV has an expense ratio of 0.03% and SPY charges 0.09%.

Bottom-Line

Passively managed ETFs are becoming increasingly popular with institutional as well as retail investors due to their low cost, transparency, flexibility and tax efficiency. They are 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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