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Is SPDR S&P Software & Services ETF (XSW) a Strong ETF Right Now?
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Designed to provide broad exposure to the Technology ETFs category of the market, the SPDR S&P Software & Services ETF (XSW - Free Report) is a smart beta exchange traded fund launched on 09/28/2011.
What Are Smart Beta ETFs?
For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.
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.
These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of such characteristics.
While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.
Fund Sponsor & Index
The fund is sponsored by State Street Global Advisors. It has amassed assets over $379.06 million, making it one of the average sized ETFs in the Technology ETFs. XSW seeks to match the performance of the S&P Software & Services Select Industry Index before fees and expenses.
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
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.
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 0.09%.
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.
XSW's heaviest allocation is in the Information Technology sector, which is about 96.90% of the portfolio.
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 added roughly 0.46% and it's up approximately 22.82% so far this year and in the past one year (as of 04/03/2024), respectively. XSW has traded between $112.81 and $157.20 during this last 52-week period.
The fund has a beta of 1.12 and standard deviation of 28.77% for the trailing three-year period, which makes XSW a high risk choice in this particular 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 $283.04 million in assets, iShares Expanded Tech-Software Sector ETF has $7.36 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?
Designed to provide broad exposure to the Technology ETFs category of the market, the SPDR S&P Software & Services ETF (XSW - Free Report) is a smart beta exchange traded fund launched on 09/28/2011.
What Are Smart Beta ETFs?
For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.
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.
These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of such characteristics.
While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.
Fund Sponsor & Index
The fund is sponsored by State Street Global Advisors. It has amassed assets over $379.06 million, making it one of the average sized ETFs in the Technology ETFs. XSW seeks to match the performance of the S&P Software & Services Select Industry Index before fees and expenses.
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
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.
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 0.09%.
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.
XSW's heaviest allocation is in the Information Technology sector, which is about 96.90% of the portfolio.
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 added roughly 0.46% and it's up approximately 22.82% so far this year and in the past one year (as of 04/03/2024), respectively. XSW has traded between $112.81 and $157.20 during this last 52-week period.
The fund has a beta of 1.12 and standard deviation of 28.77% for the trailing three-year period, which makes XSW a high risk choice in this particular 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 $283.04 million in assets, iShares Expanded Tech-Software Sector ETF has $7.36 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.