Designed to provide broad exposure to the technology-software segment of the stock market, the SPDR S&P Software & Services ETF (XSW) is a passively managed exchange-traded fund launched on 09/28/2011.
While an excellent vehicle for long-term investors, passively managed ETFs are a popular choice among institutional and retail investors due to their low cost, transparency, flexibility and tax efficiency.
Sector ETFs also give investors access to a broad group of companies in specific sectors that offer low risk and diversified exposure. Technology – Software is one of the 16 broad Zacks sectors within the Zacks Industry Classification. It is currently ranked 6, placing it in the top 38%.
The fund is sponsored by State Street Global Advisors. It has accumulated assets over $302.53 million, making it one of the average ETFs trying to match the performance of the technology-software segment of the stock market. 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 subsector portion of the S&P Total Stock Market Index. S&P TMI tracks all US common stocks listed on the NYSE, AMEX, NASDAQ National Market and NASDAQ Global Select Market. The software index is a modified equilibrium index.
Since cheaper funds tend to outperform more expensive funds, all other factors remaining equal, it’s 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 cheapest products in the space.
It has a trailing 12-month yield of 0.18%.
Sector Exposure and Top Holdings
Although ETFs offer diversified exposure that minimizes the risk of individual stocks, it’s still important to research a fund’s holdings before investing. Fortunately, most ETFs are highly transparent products that disclose their holdings on a daily basis.
This ETF has the heaviest allocation in the information technology sector – about 96.60% of the portfolio.
Looking at individual holdings, Splunk Inc ( SPLK ) accounts for about 0.89% of total assets, followed by Engagesmart Inc ( ESMT ) and Palantir Technologies Inc A ( PLTR ).
The top 10 holdings account for about 8.34% of total assets under management.
Performance and risk
The ETF has added approx. 22.20%, and it has increased by approx. 14.77% so far this year and in the past year (as of 16/11/2023). XSW has traded between $104.54 and $142.60 over this past 52-week period.
The ETF has a beta of 1.11 and a standard deviation of 29.24% for the trailing three-year period, making it a high-risk pick in the area. With around 148 holdings, it effectively diversifies company-specific risk.
The SPDR S&P Software & Services ETF has a Zacks ETF Rank of 1 (Strong Buy), which is based on expected asset class returns, expense ratios and momentum, among other factors. Because of this, XSW is an excellent option for investors seeking exposure to the technology ETFs segment of the market. There are other additional ETFs in the space that investors could also consider.
The Invesco AI and Next Gen Software ETF (IGPT) tracks the STOXX WORLD AC NEXGEN SOFTWARE DEV ID and the iShares Expanded Tech-Software Sector ETF (IGV) tracks the S&P North American Technology-Software Index. The Invesco AI and Next Gen Software ETF has $174.13 million in assets, the iShares Expanded Tech-Software Sector ETF has $7.08 billion. IGPT has an expense ratio of 0.60% and IGV charges of 0.41%.
To learn more about this product and other ETFs, screen for products that match your investment goals and read articles on the latest developments in the ETF investing universe, please visit the Zacks ETF Center.
Want key ETF information delivered straight to your inbox?
Zacks’ free fund newsletter will inform you of top news and analysis as well as top performing ETFs every week.
Get it for free >>
Want the latest recommendations from Zacks Investment Research? Today you can download 7 best stocks for the next 30 days. Click to get this free report
SPDR S&P Software & Services ETF (XSW): ETF Research Reports
Splunk Inc. (SPLK): Free Stock Analysis Report
iShares Expanded Tech-Software Sector ETF (IGV): ETF Research Reports
Palantir Technologies Inc. (PLTR): Free Stock Analysis Report
EngageSmart, Inc. (ESMT): Free Stock Analysis Report
Invesco AI and Next Gen Software ETF (IGPT): ETF Research Reports
To read this article on Zacks.com click here.
Zacks Investment Research
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.