Should Invesco S&P SmallCap Momentum ETF (XSMO) Be on Your Investing Radar?

Designed to provide broad exposure to the Small Cap Growth segment of the US equity market, the Invesco S&P SmallCap Momentum ETF (XSMO) is a passively managed exchange traded fund launched on 03/03/2005.The fund is sponsored by Invesco. It has amassed assets over $1.44 billion, making it one of the larger ETFs attempting to match the Small Cap Growth segment of the US equity market.Why Small Cap GrowthThere's a lot of potential to investing in small cap companies, but with market capitalization below $2 billion, that high potential comes with even higher risk.While growth stocks do boast higher than average sales and earnings growth rates, and they are expected to grow faster than the wider market, investors should note these kinds of stocks have higher valuations. Something to keep in mind is the higher level of volatility that is affiliated with growth stocks. They are likely to outperform value stocks in strong bull markets but over the longer-term, value stocks have delivered better returns than growth stocks in almost all markets.CostsWhen 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 0.39%, putting it on par with most peer products in the space.It has a 12-month trailing dividend yield of 0.64%.Sector Exposure and Top HoldingsETFs 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.This ETF has heaviest allocation to the Industrials sector--about 28.70% of the portfolio. Financials and Consumer Discretionary round out the top three.Looking at individual holdings, Jackson Financial Inc (JXN) accounts for about 3.16% of total assets, followed by Armstrong World Industries Inc (AWI) and Stride Inc (LRN).The top 10 holdings account for about 23.2% of total assets under management.Performance and RiskXSMO seeks to match the performance of the S&P SMALLCAP 600 MOMENTUM INDEX before fees and expenses. The S&P Smallcap 600 Momentum Index is composed of securities with strong growth characteristics selected from the Russell 2000 Index.The ETF has lost about -2.10% so far this year and it's up approximately 12.05% in the last one year (as of 02/25/2025). In the past 52-week period, it has traded between $56.16 and $73.72.The ETF has a beta of 1.09 and standard deviation of 22.19% for the trailing three-year period. With about 114 holdings, it effectively diversifies company-specific risk.AlternativesInvesco S&P SmallCap Momentum 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, XSMO is a reasonable option for those seeking exposure to the Style Box - Small Cap Growth area of the market. Investors might also want to consider some other ETF options in the space.The iShares Russell 2000 Growth ETF (IWO) and the Vanguard Small-Cap Growth ETF (VBK) track a similar index. While iShares Russell 2000 Growth ETF has $11.99 billion in assets, Vanguard Small-Cap Growth ETF has $19.41 billion. IWO has an expense ratio of 0.24% and VBK charges 0.07%.Bottom-LineAn increasingly popular option among retail and institutional investors, passively managed ETFs offer low costs, transparency, flexibility, and tax efficiency; they are also 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.Want key ETF info delivered straight to your inbox?Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week.Get it free >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Invesco S&P SmallCap Momentum ETF (XSMO): ETF Research Reports Armstrong World Industries, Inc. (AWI): Free Stock Analysis Report Stride, Inc. (LRN): Free Stock Analysis Report iShares Russell 2000 Growth ETF (IWO): ETF Research Reports Vanguard Small-Cap Growth ETF (VBK): ETF Research Reports Jackson Financial Inc. (JXN): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks