If you're interested in broad exposure to the Technology - Broad segment of the equity market, look no further than the Technology Select Sector SPDR ETF (
XLK Quick Quote XLK - Free Report) , a passively managed exchange traded fund launched on 12/16/1998.
While an excellent vehicle for long term investors, passively managed ETFs are a popular choice among institutional and retail investors due to their low costs, transparency, flexibility, and tax efficiency.
Investor-friendly, sector ETFs provide many options to gain low risk and diversified exposure to a broad group of companies in particular sectors. Technology - Broad is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 8, placing it in top 50%.
The fund is sponsored by State Street Global Advisors. It has amassed assets over $40 billion, making it the largest ETF attempting to match the performance of the Technology - Broad segment of the equity market. XLK seeks to match the performance of the Technology Select Sector Index before fees and expenses.
The Technology Select Sector Index includes companies from the following industries: computers & peripherals; software; diversified telecommunication services; communications equipment; semiconductor & semiconductor equipment; internet software & services; IT services; wireless telecommunication services; electronic equipment & instruments; and office electronics.
Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.
Annual operating expenses for this ETF are 0.10%, making it one of the least expensive products in the space.
It has a 12-month trailing dividend yield of 0.90%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
This ETF has heaviest allocation in the Information Technology sector--about 100% of the portfolio.
Looking at individual holdings, Apple Inc. (
AAPL Quick Quote AAPL - Free Report) accounts for about 25.09% of total assets, followed by Microsoft Corporation ( MSFT Quick Quote MSFT - Free Report) and Nvidia Corporation ( NVDA Quick Quote NVDA - Free Report) .
The top 10 holdings account for about 66.13% of total assets under management.
Performance and Risk
The ETF has lost about -23.62% so far this year and is down about -7.39% in the last one year (as of 06/27/2022). In that past 52-week period, it has traded between $123.49 and $176.65.
The ETF has a beta of 1.08 and standard deviation of 29.97% for the trailing three-year period, making it a medium risk choice in the space. With about 78 holdings, it effectively diversifies company-specific risk.
Technology Select Sector SPDR ETF holds a Zacks ETF Rank of 1 (Strong Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, XLK is a great option for investors seeking exposure to the Technology ETFs segment of the market. There are other additional ETFs in the space that investors could consider as well.
ARK Innovation ETF (
ARKK Quick Quote ARKK - Free Report) tracks N/A and the Vanguard Information Technology ETF ( VGT Quick Quote VGT - Free Report) tracks MSCI US Investable Market Information Technology 25/50 Index. ARK Innovation ETF has $9.27 billion in assets, Vanguard Information Technology ETF has $42.17 billion. ARKK has an expense ratio of 0.75% and VGT charges 0.10%. 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.