Should You Invest in the Invesco S&P 500 Equal Weight Health Care ETF (RSPH)?

Looking for broad exposure to the Industrials - Water segment of the equity market? You should consider the First Trust Water ETF (FIW), a passively managed exchange traded fund launched on 05/08/2007.

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.

Sector ETFs also provide investors access to a broad group of companies in particular sectors that offer low risk and diversified exposure. Industrials - Water is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 12, placing it in bottom 25%.

Index Details

The fund is sponsored by First Trust Advisors. It has amassed assets over $1.91 billion, making it one of the larger ETFs attempting to match the performance of the Industrials - Water segment of the equity market. FIW seeks to match the performance of the ISE Clean Edge Water Index before fees and expenses.

The ISE Clean Edge Water Index is a modified market capitalization-weighted index comprised of exchange-listed companies that derive a substantial portion of their revenues from the potable and wastewater industry.

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 0.53%, making it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 0.59%.

Sector Exposure and Top Holdings

It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation in the Industrials sector--about 56.40% of the portfolio. Utilities and Healthcare round out the top three.

Looking at individual holdings, Waters Corporation (WAT) accounts for about 4.10% of total assets, followed by Idexx Laboratories, Inc. (IDXX) and Idex Corporation (IEX).

The top 10 holdings account for about 39.83% of total assets under management.

Performance and Risk

So far this year, FIW has added roughly 15.81%, and was up about 33.45% in the last one year (as of 11/14/2024). During this past 52-week period, the fund has traded between $85.96 and $110.91.

The ETF has a beta of 1.02 and standard deviation of 19.39% for the trailing three-year period, making it a medium risk choice in the space. With about 38 holdings, it has more concentrated exposure than peers.

Alternatives

First Trust Water 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, FIW is a good option for those seeking exposure to the Industrials ETFs area of the market. Investors might also want to consider some other ETF options in the space.

Invesco S&P Global Water Index ETF (CGW) tracks S&P GLOBAL WATER INDEX and the Invesco Water Resources ETF (PHO) tracks NASDAQ OMX US Water Index. Invesco S&P Global Water Index ETF has $967.28 million in assets, Invesco Water Resources ETF has $2.32 billion. CGW has an expense ratio of 0.56% and PHO charges 0.60%.

Bottom Line

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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