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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?
Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.
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.
By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.
This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.
Fund Sponsor & Index
The fund is managed by State Street Global Advisors. XSW has been able to amass assets over $362.60 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.
Operating expenses on an annual basis are 0.35% for this ETF, which makes it one of the least expensive products in the space.
The fund has a 12-month trailing dividend yield of 0.09%.
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 96.60% of the portfolio.
Taking into account individual holdings, Microstrategy Inc Cl A (MSTR - Free Report) accounts for about 0.98% of the fund's total assets, followed by Cleanspark Inc (CLSK - Free Report) and Applovin Corp Class A (APP - Free Report) .
Its top 10 holdings account for approximately 8.53% of XSW's total assets under management.
Performance and Risk
The ETF has lost about -2.35% and is up roughly 12.59% so far this year and in the past one year (as of 06/07/2024), respectively. XSW has traded between $117.57 and $157.20 during this last 52-week period.
XSW has a beta of 1.12 and standard deviation of 28.66% for the trailing three-year period, which makes the fund a high risk choice in the space. With about 138 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 $339.81 million in assets, iShares Expanded Tech-Software Sector ETF has $5.66 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?
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?
Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.
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.
By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.
This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.
Fund Sponsor & Index
The fund is managed by State Street Global Advisors. XSW has been able to amass assets over $362.60 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.
Operating expenses on an annual basis are 0.35% for this ETF, which makes it one of the least expensive products in the space.
The fund has a 12-month trailing dividend yield of 0.09%.
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 96.60% of the portfolio.
Taking into account individual holdings, Microstrategy Inc Cl A (MSTR - Free Report) accounts for about 0.98% of the fund's total assets, followed by Cleanspark Inc (CLSK - Free Report) and Applovin Corp Class A (APP - Free Report) .
Its top 10 holdings account for approximately 8.53% of XSW's total assets under management.
Performance and Risk
The ETF has lost about -2.35% and is up roughly 12.59% so far this year and in the past one year (as of 06/07/2024), respectively. XSW has traded between $117.57 and $157.20 during this last 52-week period.
XSW has a beta of 1.12 and standard deviation of 28.66% for the trailing three-year period, which makes the fund a high risk choice in the space. With about 138 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 $339.81 million in assets, iShares Expanded Tech-Software Sector ETF has $5.66 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.