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Is SPDR S&P Software & Services ETF (XSW) a Strong ETF Right Now?
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The SPDR S&P Software & Services ETF (XSW - Free Report) made its debut on 09/28/2011, and is a smart beta exchange traded fund that provides 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.
A good option for investors who believe in market efficiency, market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns.
On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.
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 $295.05 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
For ETF investors, expense ratios are an important factor when considering a fund's return; in the long-term, cheaper funds actually have the ability to outperform their more expensive cousins if all other things remain the same.
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 0.19%.
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.
This ETF has heaviest allocation in the Information Technology sector - about 95.60% of the portfolio.
Taking into account individual holdings, Applovin Corp Class A (APP - Free Report) accounts for about 1.17% of the fund's total assets, followed by Cleanspark Inc (CLSK - Free Report) and Marathon Digital Holdings In (MARA - Free Report) .
The top 10 holdings account for about 9.39% of total assets under management.
Performance and Risk
The ETF has added about 15.15% and is up about 17.76% so far this year and in the past one year (as of 09/28/2023), respectively. XSW has traded between $102 and $142.60 during this last 52-week period.
The ETF has a beta of 1.12 and standard deviation of 29.16% for the trailing three-year period, making it a high risk choice in the space. With about 152 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 AI and Next Gen Software ETF (IGPT - Free Report) tracks STOXX WORLD AC NEXGEN SOFTWARE DEV ID and the iShares Expanded Tech-Software Sector ETF (IGV - Free Report) tracks S&P North American Technology-Software Index. Invesco AI and Next Gen Software ETF has $161.80 million in assets, iShares Expanded Tech-Software Sector ETF has $6.34 billion. IGPT has an expense ratio of 0.60% and IGV charges 0.41%.
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?
The SPDR S&P Software & Services ETF (XSW - Free Report) made its debut on 09/28/2011, and is a smart beta exchange traded fund that provides 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.
A good option for investors who believe in market efficiency, market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns.
On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.
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 $295.05 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
For ETF investors, expense ratios are an important factor when considering a fund's return; in the long-term, cheaper funds actually have the ability to outperform their more expensive cousins if all other things remain the same.
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 0.19%.
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.
This ETF has heaviest allocation in the Information Technology sector - about 95.60% of the portfolio.
Taking into account individual holdings, Applovin Corp Class A (APP - Free Report) accounts for about 1.17% of the fund's total assets, followed by Cleanspark Inc (CLSK - Free Report) and Marathon Digital Holdings In (MARA - Free Report) .
The top 10 holdings account for about 9.39% of total assets under management.
Performance and Risk
The ETF has added about 15.15% and is up about 17.76% so far this year and in the past one year (as of 09/28/2023), respectively. XSW has traded between $102 and $142.60 during this last 52-week period.
The ETF has a beta of 1.12 and standard deviation of 29.16% for the trailing three-year period, making it a high risk choice in the space. With about 152 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 AI and Next Gen Software ETF (IGPT - Free Report) tracks STOXX WORLD AC NEXGEN SOFTWARE DEV ID and the iShares Expanded Tech-Software Sector ETF (IGV - Free Report) tracks S&P North American Technology-Software Index. Invesco AI and Next Gen Software ETF has $161.80 million in assets, iShares Expanded Tech-Software Sector ETF has $6.34 billion. IGPT has an expense ratio of 0.60% and IGV charges 0.41%.
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.