Back to top

Image: Bigstock

Is State Street SPDR S&P Software & Services ETF (XSW) a Strong ETF Right Now?

Read MoreHide Full Article

Launched on 09/28/2011, the State Street 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?

The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the market or a particular market segment.

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.

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.

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.

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

XSW is managed by State Street Investment Management, and this fund has amassed over $444.12 million, which makes it one of the average sized ETFs in the Technology ETFs. This particular fund, 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

Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive cousins if all other fundamentals are the same.

With one of the least expensive products in the space, this ETF has annual operating expenses of 0.35%.

It has a 12-month trailing dividend yield of 0.06%.

Sector Exposure and Top Holdings

Most ETFs are very transparent products, and disclose their holdings on a daily basis. ETFs also offer diversified exposure, which minimizes single stock risk, though it's still important for investors to research a fund's holdings.

Representing 97% of the portfolio, the fund has heaviest allocation to the Information Technology sector.

When you look at individual holdings, Cipher Mining Inc (CIFR) accounts for about 1.41% of the fund's total assets, followed by D Wave Quantum Inc (QBTS) and Uipath Inc Class A (PATH).

Its top 10 holdings account for approximately 11.45% of XSW's total assets under management.

Performance and Risk

The ETF has added roughly 1.22% so far this year and is down about -1.03% in the last one year (as of 12/24/2025). In the past 52-week period, it has traded between $141.65 and $205.24

The fund has a beta of 1.15 and standard deviation of 24.81% for the trailing three-year period, which makes XSW a high risk choice in this particular space. With about 138 holdings, it effectively diversifies company-specific risk .

Alternatives

State Street 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) tracks STOXX WORLD AC NEXGEN SOFTWARE DEV ID and the iShares Expanded Tech-Software Sector ETF (IGV) tracks S&P North American Technology-Software Index. Invesco AI and Next Gen Software ETF has $650.87 million in assets, iShares Expanded Tech-Software Sector ETF has $8.26 billion. IGPT has an expense ratio of 0.56% and IGV changes 0.39%.

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.

See More Zacks Research for These Tickers


Normally $25 each - click below to receive one report FREE:


State Street SPDR S&P Software & Services ETF (XSW) - free report >>

Published in