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

Zacks Equity Research
·3-min read

Designed to provide broad exposure to the Technology - Software segment of the equity market, the Invesco Dynamic Software ETF (PSJ) is 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 also provide investors access to a broad group of companies in particular sectors that offer low risk and diversified exposure. 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%.

Index Details

The fund is sponsored by Invesco. It has amassed assets over $584.15 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.

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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

Expense ratios are an important factor in the return of an ETF and in the long term, cheaper funds can significantly outperform their more expensive counterparts, other things remaining the same.

Annual operating expenses for this ETF are 0.56%, making it on par with most peer products in the space.

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 59.20% of the portfolio. Telecom and Healthcare round out the top three.

Looking at individual holdings, Liberty Broadband Corp (LBRDK) accounts for about 5.64% of total assets, followed by Microsoft Corp (MSFT) and Electronic Arts Inc (EA).

The top 10 holdings account for about 47.54% of total assets under management.

Performance and Risk

The ETF return is roughly 3.41% and was up about 46.30% so far this year and in the past one year (as of 05/21/2021), respectively. PSJ has traded between $106.07 and $185.30 during this last 52-week period.

The ETF has a beta of 0.99 and standard deviation of 29.23% for the trailing three-year period, making it a high risk choice in the space. With about 30 holdings, it has more concentrated exposure than peers.

Alternatives

Invesco Dynamic Software 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, PSJ is a reasonable option for those seeking exposure to the Technology ETFs area of the market. Investors might also want to consider some other ETF options in the space.

SPDR S&P 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 S&P Software & Services ETF has $581.90 million in assets, iShares Expanded TechSoftware Sector ETF has $4.88 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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INVS-DYN SFTWR (PSJ): ETF Research Reports
 
Microsoft Corporation (MSFT) : Free Stock Analysis Report
 
Electronic Arts Inc. (EA) : Free Stock Analysis Report
 
Liberty Broadband Corporation (LBRDK) : Free Stock Analysis Report
 
SPDR-SP SOF&SER (XSW): ETF Research Reports
 
ISHARS-EX TEC-S (IGV): ETF Research Reports
 
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