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Is SPDR S&P Software & Services ETF (XSW) a Strong ETF Right Now?
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A smart beta exchange traded fund, the SPDR S&P Software & Services ETF (XSW - Free Report) debuted on 09/28/2011, and offers 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.
But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.
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.
The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.
Fund Sponsor & Index
Managed by State Street Global Advisors, XSW has amassed assets over $363.33 million, making 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
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.
Annual operating expenses for this ETF are 0.35%, making it one of the least expensive products in the space.
XSW's 12-month trailing dividend yield is 0.11%.
Sector Exposure and Top Holdings
While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
For XSW, it has heaviest allocation in the Information Technology sector --about 97.10% of the portfolio.
When you look at individual holdings, Clear Secure Inc Class A (YOU - Free Report) accounts for about 1.20% of the fund's total assets, followed by Aurora Innovation Inc (AUR - Free Report) and Zeta Global Holdings Corp A (ZETA - Free Report) .
XSW's top 10 holdings account for about 10.11% of its total assets under management.
Performance and Risk
Year-to-date, the SPDR S&P Software & Services ETF has added about 4.99% so far, and it's up approximately 24.39% over the last 12 months (as of 10/08/2024). XSW has traded between $117.57 and $160.77 in this past 52-week period.
The fund has a beta of 1.13 and standard deviation of 28.92% for the trailing three-year period, which makes XSW a high risk choice in this particular space. With about 137 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 $395.56 million in assets, iShares Expanded Tech-Software Sector ETF has $6.75 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?
A smart beta exchange traded fund, the SPDR S&P Software & Services ETF (XSW - Free Report) debuted on 09/28/2011, and offers 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.
But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.
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.
The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.
Fund Sponsor & Index
Managed by State Street Global Advisors, XSW has amassed assets over $363.33 million, making 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
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.
Annual operating expenses for this ETF are 0.35%, making it one of the least expensive products in the space.
XSW's 12-month trailing dividend yield is 0.11%.
Sector Exposure and Top Holdings
While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
For XSW, it has heaviest allocation in the Information Technology sector --about 97.10% of the portfolio.
When you look at individual holdings, Clear Secure Inc Class A (YOU - Free Report) accounts for about 1.20% of the fund's total assets, followed by Aurora Innovation Inc (AUR - Free Report) and Zeta Global Holdings Corp A (ZETA - Free Report) .
XSW's top 10 holdings account for about 10.11% of its total assets under management.
Performance and Risk
Year-to-date, the SPDR S&P Software & Services ETF has added about 4.99% so far, and it's up approximately 24.39% over the last 12 months (as of 10/08/2024). XSW has traded between $117.57 and $160.77 in this past 52-week period.
The fund has a beta of 1.13 and standard deviation of 28.92% for the trailing three-year period, which makes XSW a high risk choice in this particular space. With about 137 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 $395.56 million in assets, iShares Expanded Tech-Software Sector ETF has $6.75 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.