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Is SPDR S&P Software & Services ETF (XSW) a Strong ETF Right Now?
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Making its debut on 09/28/2011, smart beta exchange traded fund SPDR S&P Software & Services ETF (XSW - Free Report) provides investors 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 work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.
However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.
Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.
Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.
Fund Sponsor & Index
The fund is managed by State Street Global Advisors, and has been able to amass over $209.01 million, which makes it one of the average sized ETFs in the Technology ETFs. This particular fund, before fees and expenses, seeks to match the performance of the S&P Software & Services Select Industry Index.
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.
Annual operating expenses for this ETF are 0.35%, making it one of the least expensive products in the space.
It's 12-month trailing dividend yield comes in at 0.08%.
Sector Exposure and Top Holdings
While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
XSW's heaviest allocation is in the Information Technology sector, which is about 95.90% of the portfolio.
When you look at individual holdings, A10 Networks Inc. (ATEN - Free Report) accounts for about 0.81% of the fund's total assets, followed by Yext Inc. (YEXT - Free Report) and Fair Isaac Corporation (FICO - Free Report) .
Its top 10 holdings account for approximately 7.63% of XSW's total assets under management.
Performance and Risk
So far this year, XSW has gained about 3.92%, and is down about -28.98% in the last one year (as of 01/12/2023). During this past 52-week period, the fund has traded between $102 and $153.06.
The fund has a beta of 1.10 and standard deviation of 33.76% for the trailing three-year period, which makes XSW a high risk choice in this particular space. With about 198 holdings, it effectively diversifies company-specific risk.
Alternatives
SPDR S&P Software & Services ETF is an excellent option for investors seeking to outperform the Technology ETFs segment of the market. There are other ETFs in the space which investors could consider as well.
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 $182.70 million in assets, iShares Expanded TechSoftware Sector ETF has $4.42 billion. PSJ has an expense ratio of 0.56% and IGV charges 0.40%.
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?
Making its debut on 09/28/2011, smart beta exchange traded fund SPDR S&P Software & Services ETF (XSW - Free Report) provides investors 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 work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.
However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.
Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.
Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.
Fund Sponsor & Index
The fund is managed by State Street Global Advisors, and has been able to amass over $209.01 million, which makes it one of the average sized ETFs in the Technology ETFs. This particular fund, before fees and expenses, seeks to match the performance of the S&P Software & Services Select Industry Index.
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.
Annual operating expenses for this ETF are 0.35%, making it one of the least expensive products in the space.
It's 12-month trailing dividend yield comes in at 0.08%.
Sector Exposure and Top Holdings
While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
XSW's heaviest allocation is in the Information Technology sector, which is about 95.90% of the portfolio.
When you look at individual holdings, A10 Networks Inc. (ATEN - Free Report) accounts for about 0.81% of the fund's total assets, followed by Yext Inc. (YEXT - Free Report) and Fair Isaac Corporation (FICO - Free Report) .
Its top 10 holdings account for approximately 7.63% of XSW's total assets under management.
Performance and Risk
So far this year, XSW has gained about 3.92%, and is down about -28.98% in the last one year (as of 01/12/2023). During this past 52-week period, the fund has traded between $102 and $153.06.
The fund has a beta of 1.10 and standard deviation of 33.76% for the trailing three-year period, which makes XSW a high risk choice in this particular space. With about 198 holdings, it effectively diversifies company-specific risk.
Alternatives
SPDR S&P Software & Services ETF is an excellent option for investors seeking to outperform the Technology ETFs segment of the market. There are other ETFs in the space which investors could consider as well.
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 $182.70 million in assets, iShares Expanded TechSoftware Sector ETF has $4.42 billion. PSJ has an expense ratio of 0.56% and IGV charges 0.40%.
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.