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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) was launched on 09/28/2011, and is a smart beta exchange traded fund designed to offer 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.
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.
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.
This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix of such characteristics.
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 $359.09 million, making it one of the average sized ETFs in the Technology ETFs. Before fees and expenses, XSW 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
Expense ratios are an important factor in the return of an ETF and in the long-term, cheaper funds can significantly outperform their more expensive cousins, other things remaining the same.
Annual operating expenses for this ETF are 0.35%, making it one of the least expensive products in the space.
It has a 12-month trailing dividend yield of 0.14%.
Sector Exposure and Top Holdings
It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
Representing 96.70% of the portfolio, the fund has heaviest allocation to the Information Technology sector.
Looking at individual holdings, Cleanspark Inc (CLSK - Free Report) accounts for about 1.60% of total assets, followed by Microstrategy Inc Cl A (MSTR - Free Report) and Marathon Digital Holdings In (MARA - Free Report) .
The top 10 holdings account for about 10.35% of total assets under management.
Performance and Risk
The ETF has lost about -0.46% and was up about 18.83% so far this year and in the past one year (as of 02/02/2024), respectively. XSW has traded between $112.80 and $153.79 during this last 52-week period.
XSW has a beta of 1.13 and standard deviation of 29.32% for the trailing three-year period, which makes the fund a high risk choice in the space. With about 146 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 $203.13 million in assets, iShares Expanded Tech-Software Sector ETF has $7.63 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) was launched on 09/28/2011, and is a smart beta exchange traded fund designed to offer 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.
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.
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.
This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix of such characteristics.
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 $359.09 million, making it one of the average sized ETFs in the Technology ETFs. Before fees and expenses, XSW 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
Expense ratios are an important factor in the return of an ETF and in the long-term, cheaper funds can significantly outperform their more expensive cousins, other things remaining the same.
Annual operating expenses for this ETF are 0.35%, making it one of the least expensive products in the space.
It has a 12-month trailing dividend yield of 0.14%.
Sector Exposure and Top Holdings
It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
Representing 96.70% of the portfolio, the fund has heaviest allocation to the Information Technology sector.
Looking at individual holdings, Cleanspark Inc (CLSK - Free Report) accounts for about 1.60% of total assets, followed by Microstrategy Inc Cl A (MSTR - Free Report) and Marathon Digital Holdings In (MARA - Free Report) .
The top 10 holdings account for about 10.35% of total assets under management.
Performance and Risk
The ETF has lost about -0.46% and was up about 18.83% so far this year and in the past one year (as of 02/02/2024), respectively. XSW has traded between $112.80 and $153.79 during this last 52-week period.
XSW has a beta of 1.13 and standard deviation of 29.32% for the trailing three-year period, which makes the fund a high risk choice in the space. With about 146 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 $203.13 million in assets, iShares Expanded Tech-Software Sector ETF has $7.63 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.