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Is SPDR S&P Software & Services ETF (XSW) a Strong ETF Right Now?
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Launched on 09/28/2011, the SPDR S&P Software & Services ETF (XSW - Free Report) is a smart beta exchange traded fund offering broad exposure to the Technology ETFs category of the market.
What Are Smart Beta ETFs?
Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.
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.
By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.
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 sponsored by State Street Global Advisors. It has amassed assets over $332.25 million, making 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.
With one of the least expensive products in the space, this ETF has annual operating expenses of 0.35%.
XSW's 12-month trailing dividend yield is 0.18%.
Sector Exposure and Top Holdings
Most ETFs are very transparent products, and disclose their holdings on a daily basis. ETFs also offer diversified exposure, which minimizes single stock risk, though it's still important for investors to research a fund's holdings.
Representing 93.90% of the portfolio, the fund has heaviest allocation to the Information Technology sector.
Taking into account individual holdings, Riot Platforms Inc. (RIOT - Free Report) accounts for about 1.23% of the fund's total assets, followed by Marathon Digital Holdings Inc (MARA - Free Report) and Microstrategy Incorporated Class A (MSTR - Free Report) .
Its top 10 holdings account for approximately 8.7% of XSW's total assets under management.
Performance and Risk
The ETF return is roughly 31.31% and was up about 22.58% so far this year and in the past one year (as of 07/20/2023), respectively. XSW has traded between $102 and $142.60 during this last 52-week period.
The fund has a beta of 1.12 and standard deviation of 29.41% for the trailing three-year period, which makes XSW a high risk choice in this particular space. With about 158 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 Tech-Software Sector ETF (IGV - Free Report) tracks S&P North American Technology-Software Index. Invesco Dynamic Software ETF has $206.50 million in assets, iShares Expanded Tech-Software Sector ETF has $6.84 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?
Launched on 09/28/2011, the SPDR S&P Software & Services ETF (XSW - Free Report) is a smart beta exchange traded fund offering broad exposure to the Technology ETFs category of the market.
What Are Smart Beta ETFs?
Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.
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.
By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.
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 sponsored by State Street Global Advisors. It has amassed assets over $332.25 million, making 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.
With one of the least expensive products in the space, this ETF has annual operating expenses of 0.35%.
XSW's 12-month trailing dividend yield is 0.18%.
Sector Exposure and Top Holdings
Most ETFs are very transparent products, and disclose their holdings on a daily basis. ETFs also offer diversified exposure, which minimizes single stock risk, though it's still important for investors to research a fund's holdings.
Representing 93.90% of the portfolio, the fund has heaviest allocation to the Information Technology sector.
Taking into account individual holdings, Riot Platforms Inc. (RIOT - Free Report) accounts for about 1.23% of the fund's total assets, followed by Marathon Digital Holdings Inc (MARA - Free Report) and Microstrategy Incorporated Class A (MSTR - Free Report) .
Its top 10 holdings account for approximately 8.7% of XSW's total assets under management.
Performance and Risk
The ETF return is roughly 31.31% and was up about 22.58% so far this year and in the past one year (as of 07/20/2023), respectively. XSW has traded between $102 and $142.60 during this last 52-week period.
The fund has a beta of 1.12 and standard deviation of 29.41% for the trailing three-year period, which makes XSW a high risk choice in this particular space. With about 158 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 Tech-Software Sector ETF (IGV - Free Report) tracks S&P North American Technology-Software Index. Invesco Dynamic Software ETF has $206.50 million in assets, iShares Expanded Tech-Software Sector ETF has $6.84 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.