The Invesco S&P 500 Quality ETF (SPHQ) made its debut on 12/06/2005, and is a smart beta exchange traded fund that provides broad exposure to the Style Box - Large Cap Blend category of the market.
What Are Smart Beta ETFs?
The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.
Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.
But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.
These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of such characteristics.
The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.
Fund Sponsor & Index
SPHQ is managed by Invesco, and this fund has amassed over $15.25 billion, which makes it one of the largest ETFs in the Style Box - Large Cap Blend. This particular fund seeks to match the performance of the S&P 500 Quality Index before fees and expenses.
The S&P 500 Quality Index tracks the performance of stocks in the S&P 500 Index that have the highest quality score, which is calculated based on three fundamental measures, return on equity, accruals ratio and financial leverage ratio.
Cost & Other Expenses
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 cousins, other things remaining the same.
With one of the cheaper products in the space, this ETF has annual operating expenses of 0.15%.
It's 12-month trailing dividend yield comes in at 1.03%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
For SPHQ, it has heaviest allocation in the Industrials sector --about 26.2% of the portfolio --while Information Technology and Consumer Staples round out the top three.
Taking into account individual holdings, Apple Inc (AAPL) accounts for about 5.66% of the fund's total assets, followed by Costco Wholesale Corp (COST) and Mastercard Inc (MA).
Its top 10 holdings account for approximately 39.15% of SPHQ's total assets under management.
Performance and Risk
So far this year, SPHQ has added roughly 8.8%, and was up about 9.78% in the last one year (as of 09/17/2025). During this past 52-week period, the fund has traded between $59.24 and $72.95.
SPHQ has a beta of 0.92 and standard deviation of 15.32% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 102 holdings, it effectively diversifies company-specific risk .
Alternatives
Invesco S&P 500 Quality ETF is an excellent option for investors seeking to outperform the Style Box - Large Cap Blend segment of the market. There are other ETFs in the space which investors could consider as well.
iShares Core Dividend Growth ETF (DGRO) tracks Morningstar US Dividend Growth Index and the Vanguard Dividend Appreciation ETF (VIG) tracks NASDAQ US Dividend Achievers Select Index. iShares Core Dividend Growth ETF has $34.01 billion in assets, Vanguard Dividend Appreciation ETF has $97.74 billion. DGRO has an expense ratio of 0.08% and VIG changes 0.05%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box - Large Cap Blend
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 S&P 500 Quality ETF (SPHQ): ETF Research ReportsThis article originally published on Zacks Investment Research (zacks.com).
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