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Is SPDR S&P Software & Services ETF (XSW) a Strong ETF Right Now?
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A smart beta exchange traded fund, the SPDR S&P Software & Services ETF (XSW - Free Report) debuted on 09/28/2011, and offers broad exposure to the Technology ETFs 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.
Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.
There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.
Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other such characteristics.
Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.
Fund Sponsor & Index
Managed by State Street Global Advisors, XSW has amassed assets over $574.12 million, making it one of the average sized ETFs in the Technology ETFs. 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 portion of the S&P Total Stock Market Index. The S&P TMI tracks all the U.S. common stocks listed on the NYSE, AMEX, NASDAQ National Market and NASDAQ Global Select Market. The Software Index is a modified equal weight index.
Cost & Other Expenses
When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.
With one of the least expensive products in the space, this ETF has annual operating expenses of 0.35%.
The fund has a 12-month trailing dividend yield of 0.05%.
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 XSW, it has heaviest allocation in the Information Technology sector --about 93.60% of the portfolio.
When you look at individual holdings, Riot Blockchain Inc (RIOT - Free Report) accounts for about 2.72% of the fund's total assets, followed by Microstrategy Incorporated Class A (MSTR - Free Report) and Digital Turbine Inc. (APPS - Free Report) .
Its top 10 holdings account for approximately 10.29% of XSW's total assets under management.
Performance and Risk
The ETF has gained about 1.98% and is up roughly 54.48% so far this year and in the past one year (as of 05/19/2021), respectively. XSW has traded between $101.59 and $175.77 during this last 52-week period.
The ETF has a beta of 1.16 and standard deviation of 27.97% for the trailing three-year period, making it a high risk choice in the space. With about 179 holdings, it effectively diversifies company-specific risk.
Alternatives
SPDR S&P Software & Services ETF is a reasonable option for investors seeking to outperform the Technology ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
Invesco Dynamic Software ETF tracks Dynamic Software Intellidex Index and the iShares Expanded TechSoftware Sector ETF (IGV - Free Report) tracks S&P North American Technology-Software Index. Invesco Dynamic Software ETF has $571.32 million in assets, iShares Expanded TechSoftware Sector ETF has $4.82 billion. PSJ has an expense ratio of 0.56% and IGV charges 0.46%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Technology ETFs.
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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Is SPDR S&P Software & Services ETF (XSW) a Strong ETF Right Now?
A smart beta exchange traded fund, the SPDR S&P Software & Services ETF (XSW - Free Report) debuted on 09/28/2011, and offers broad exposure to the Technology ETFs 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.
Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.
There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.
Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other such characteristics.
Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.
Fund Sponsor & Index
Managed by State Street Global Advisors, XSW has amassed assets over $574.12 million, making it one of the average sized ETFs in the Technology ETFs. 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 portion of the S&P Total Stock Market Index. The S&P TMI tracks all the U.S. common stocks listed on the NYSE, AMEX, NASDAQ National Market and NASDAQ Global Select Market. The Software Index is a modified equal weight index.
Cost & Other Expenses
When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.
With one of the least expensive products in the space, this ETF has annual operating expenses of 0.35%.
The fund has a 12-month trailing dividend yield of 0.05%.
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 XSW, it has heaviest allocation in the Information Technology sector --about 93.60% of the portfolio.
When you look at individual holdings, Riot Blockchain Inc (RIOT - Free Report) accounts for about 2.72% of the fund's total assets, followed by Microstrategy Incorporated Class A (MSTR - Free Report) and Digital Turbine Inc. (APPS - Free Report) .
Its top 10 holdings account for approximately 10.29% of XSW's total assets under management.
Performance and Risk
The ETF has gained about 1.98% and is up roughly 54.48% so far this year and in the past one year (as of 05/19/2021), respectively. XSW has traded between $101.59 and $175.77 during this last 52-week period.
The ETF has a beta of 1.16 and standard deviation of 27.97% for the trailing three-year period, making it a high risk choice in the space. With about 179 holdings, it effectively diversifies company-specific risk.
Alternatives
SPDR S&P Software & Services ETF is a reasonable option for investors seeking to outperform the Technology ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
Invesco Dynamic Software ETF tracks Dynamic Software Intellidex Index and the iShares Expanded TechSoftware Sector ETF (IGV - Free Report) tracks S&P North American Technology-Software Index. Invesco Dynamic Software ETF has $571.32 million in assets, iShares Expanded TechSoftware Sector ETF has $4.82 billion. PSJ has an expense ratio of 0.56% and IGV charges 0.46%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Technology ETFs.
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.