Should you invest in the SPDR S&P Software & Services (XSW) ETF?
Are you looking for broad exposure to the Technology – Software segment of the equity market? You should consider the SPDR S&P Software & Services ETF (XSW), a passively managed exchange-traded fund launched on 09/28/2011.
Retail and institutional investors are increasingly turning to passively managed ETFs because they offer low costs, transparency, flexibility and tax efficiency; these types of funds are also excellent vehicles for long-term investors.
Sector ETFs are also commodity funds, providing many ways to gain low-risk, diversified exposure to a large group of companies in particular sectors. Technology – Software is one of the 16 major Zacks sectors in the Zacks Industry classification. He is currently ranked 12, placing him in the bottom 25%.
The fund is sponsored by State Street Global Advisors. It has amassed over $ 563.54 million in assets, making it one of the mid-sized ETFs attempting to match the performance of the Technology – Software segment of the equity market. XSW seeks to match the performance of the S&P Software & Services Select Industry Index before fees and expenses.
The S&P Software & Services Select Industry index represents the software sub-industry part of the S&P Total Stock Market index. The S&P TMI tracks all US common stocks listed on the NYSE, AMEX, NASDAQ National Market, and NASDAQ Global Select Market. The software index is a modified equal weight index.
When considering the total return of an ETF, expense ratios are an important factor, and cheaper funds can significantly outperform their more expensive counterparts in the long run if all other factors remain equal.
This ETF’s annual operating expenses are 0.35%, making it one of the cheapest products in the space.
It has a 12 month rolling dividend yield of 0.11%.
Sector exposure and main titles
It is important to delve into the holdings of an ETF before investing despite the many advantages of these types of funds, such as diversified exposure, which minimizes the risk associated with individual stocks. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
This ETF has the highest allocation in the IT sector, accounting for around 97% of the portfolio.
When it comes to individual holdings, Asana Inc. Class A (ASAN) accounts for approximately 0.77% of total assets, followed by Sykes Enterprises Incorporated (SYKE) and Trade Desk Inc. Class A (TTD).
The top 10 holdings represent approximately 6.50% of total assets under management.
Return and risk
The ETF added around 18.62% and is up around 54.52% so far this year and over the last year (as of 9/24/2021), respectively. XSW traded between $ 117.72 and $ 181.83 during this last 52 week period.
The ETF has a beta of 1.16 and a standard deviation of 27.94% for the three-year period, making it a high-risk choice in the space. With around 186 participations, it effectively diversifies the risk specific to the company.
The SPDR S&P Software & Services ETF holds a Zacks ETF ranking of 2 (Buy), which is based on the expected return of the asset class, expense ratio and momentum, among other factors. For this reason, XSW is a great option for investors looking for exposure to the tech ETF segment of the market. There are other additional ETFs in the space that investors might want to consider as well.
The Invesco Dynamic Software ETF (PSJ) tracks the Dynamic Software Intellidex index and the iShares Expanded TechSoftware Sector (IGV) ETF tracks the S&P North American Technology-Software index. Invesco Dynamic Software ETF has $ 502.64 million in assets, iShares Expanded TechSoftware Sector ETF has $ 5.75 billion. PSJ has an expense ratio of 0.56% and IGV charges 0.43%.
To learn more about this and other ETFs, search for products that match your investment goals, and read articles on the latest developments in the ETF investing world, please visit the Zacks ETF Center.
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SPDR S&P Software & Services ETF (XSW): ETF Research Reports
The Trade Desk Inc. (TTD): Free Stock Analysis Report
IShares Expanded TechSoftware Sector (IGV) ETF: ETF Research Reports
ETF Invesco Dynamic Software (PSJ): ETF Research Reports