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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?
Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.
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.
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.
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.
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 $222.41 million, making it one of the average sized ETFs in the Technology ETFs. XSW, 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
Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.
Operating expenses on an annual basis are 0.35% for XSW, making it one of the least expensive products in the space.
XSW's 12-month trailing dividend yield is 0.14%.
Sector Exposure and Top Holdings
ETFs offer diversified exposure and thus minimize single stock risk, but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.
This ETF has heaviest allocation in the Information Technology sector - about 94.10% of the portfolio.
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) .
XSW's top 10 holdings account for about 8.7% of its total assets under management.
Performance and Risk
The ETF has added about 6.73% and is up about 3.58% so far this year and in the past one year (as of 05/15/2023), respectively. XSW has traded between $102 and $131.64 during this last 52-week period.
The ETF has a beta of 1.13 and standard deviation of 29.78% for the trailing three-year period, making it a high risk choice in the 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 $179.28 million in assets, iShares Expanded Tech-Software Sector ETF has $5.07 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?
Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.
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.
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.
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.
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 $222.41 million, making it one of the average sized ETFs in the Technology ETFs. XSW, 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
Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.
Operating expenses on an annual basis are 0.35% for XSW, making it one of the least expensive products in the space.
XSW's 12-month trailing dividend yield is 0.14%.
Sector Exposure and Top Holdings
ETFs offer diversified exposure and thus minimize single stock risk, but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.
This ETF has heaviest allocation in the Information Technology sector - about 94.10% of the portfolio.
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) .
XSW's top 10 holdings account for about 8.7% of its total assets under management.
Performance and Risk
The ETF has added about 6.73% and is up about 3.58% so far this year and in the past one year (as of 05/15/2023), respectively. XSW has traded between $102 and $131.64 during this last 52-week period.
The ETF has a beta of 1.13 and standard deviation of 29.78% for the trailing three-year period, making it a high risk choice in the 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 $179.28 million in assets, iShares Expanded Tech-Software Sector ETF has $5.07 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.