Looking for broad exposure to the Technology – Software segment of the equity market? You should consider the Invesco Dynamic Software ETF (PSJ), a passively managed exchange traded fund launched on 06/23/2005.
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.
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 11, placing it in bottom 31%.
The fund is sponsored by Invesco. It has amassed assets over $507.58 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.
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 0.58%, 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
Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
This ETF has heaviest allocation in the Information Technology sector–about 61.90% of the portfolio. Telecom and Healthcare round out the top three.
Looking at individual holdings, Docusign Inc (DOCU) accounts for about 7.10% of total assets, followed by Adobe Inc (ADBE) and Microsoft Corp (MSFT).
The top 10 holdings account for about 48.97% of total assets under management.
Performance and Risk
Year-to-date, the Invesco Dynamic Software ETF return is roughly 24.15% so far, and is up about 34.97% over the last 12 months (as of 09/30/2020). PSJ has traded between $74.11 and $130.14 in this past 52-week period.
The ETF has a beta of 1.03 and standard deviation of 27.12% 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 outstanding 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 $268.22 million in assets, iShares Expanded TechSoftware Sector ETF has $5.34 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
Microsoft Corporation (MSFT): Free Stock Analysis Report
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
DocuSign Inc. (DOCU): Free Stock Analysis Report
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