Invesco's 1,500 Stock ETF Gained 227% While Everyone Forgot About Small Caps

"Most small-cap ETFs weight holdings by market capitalization, which means the largest companies dominate. PRFZ uses Research Affiliates' fundamental indexing methodology instead, weighting companies by metrics like sales, cash flow, dividends, and book value. The result is a portfolio that tilts toward value-oriented companies generating actual earnings rather than those simply riding momentum. PRFZ spreads risk across over 500 holdings, ensuring no single company can derail the portfolio. Even the top position, Opendoor Technologies (NASDAQ:OPEN), represents just 1.08% of assets."

"The ETF leans cyclical, with 46% allocated to Industrials, Financials, and Consumer Discretionary. That positioning creates a clear pattern: strong performance when economic growth accelerates, headwinds during downturns. Recent performance reveals the tradeoff inherent in fundamental weighting. Over the past year, PRFZ returned 14.4%, slightly trailing the Russell 2000 as momentum stocks dominated the market. The fundamental approach prioritizes companies with strong cash flows and earnings over those riding short-term sentiment waves."

Invesco RAFI US 1500 Small-Mid ETF (PRFZ) applies Research Affiliates' fundamental indexing to weight 1,500 US small- and mid-cap stocks by sales, cash flow, dividends, and book value. The fund spreads risk across over 500 holdings so no single company dominates; the top holding is Opendoor Technologies at 1.08% of assets. The ETF tilts toward value-oriented, cash-generating companies rather than momentum-driven names. Sector exposure is cyclical, with 46% in Industrials, Financials, and Consumer Discretionary, performing well in economic expansions and facing headwinds in downturns. PRFZ returned 14.4% over the past year but delivered 227% over ten years, outperforming the Russell 2000.

Read at 24/7 Wall St.