Should You Invest in the Invesco Dynamic Software ETF (PSJ)?

Zacks Equity Research
·4-min read

The Invesco Dynamic Software ETF (PSJ) was launched on 06/23/2005, and is a passively managed exchange traded fund designed to offer broad exposure to the Technology - Software segment of the equity market.

Retail and institutional investors increasingly turn to passively managed ETFs because they offer low costs, transparency, flexibility, and tax efficiency; these kind of funds are also excellent vehicles for long term investors.

Additionally, sector ETFs offer convenient 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 4, placing it in top 25%.

Index Details

The fund is sponsored by Invesco. It has amassed assets over $496.70 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.

Costs

Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.

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

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 Information Technology sector--about 63.30% of the portfolio. Telecom and Healthcare round out the top three.

Looking at individual holdings, Docusign Inc (DOCU) accounts for about 6.28% of total assets, followed by Snap Inc (SNAP) and Adobe Inc (ADBE).

The top 10 holdings account for about 48.20% of total assets under management.

Performance and Risk

Year-to-date, the Invesco Dynamic Software ETF has gained about 18.62% so far, and is up about 18.09% over the last 12 months (as of 08/12/2020). PSJ has traded between $74.11 and $125.64 in this past 52-week period.

The ETF has a beta of 1.07 and standard deviation of 26.54% 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.

Alternatives

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 a great 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 $258.22 million in assets, iShares Expanded TechSoftware Sector ETF has $4.78 billion. XSW has an expense ratio of 0.35% and IGV charges 0.46%.

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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Invesco Dynamic Software ETF (PSJ): ETF Research Reports
 
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
 
Snap Inc. (SNAP) : Free Stock Analysis Report
 
DocuSign Inc. (DOCU) : Free Stock Analysis Report
 
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