Should You Invest in the SPDR S&P Software & Services ETF (XSW)?
Sector ETF report for XSW
If you're interested in broad exposure to the Technology - Software segment of the equity market, look no further than the SPDR S&P Software & Services ETF (XSW), 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 costs, transparency, flexibility, and tax efficiency.
Sector ETFs also provide investors access to a broad group of companies in particular 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 7, placing it in top 44%.
The fund is sponsored by State Street Global Advisors. It has amassed assets over $576.10 million, making it one of the average sized ETFs attempting to match the performance of the Technology - Software segment of the equity 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 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.
Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.
Annual operating expenses for this ETF are 0.35%, making it one of the least expensive products in the space.
It has a 12-month trailing dividend yield of 0.11%.
Sector Exposure and Top Holdings
ETFs offer a diversified exposure and thus minimize single stock risk but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.
This ETF has heaviest allocation in the Information Technology sector--about 96.80% of the portfolio.
Looking at individual holdings, Asana Inc. Class A (ASAN) accounts for about 0.77% of total assets, followed by Sykes Enterprises Incorporated (SYKE) and Trade Desk Inc. Class A (TTD).
The top 10 holdings account for about 6.50% of total assets under management.
Performance and Risk
Year-to-date, the SPDR S&P Software & Services ETF has added about 19% so far, and is up about 40.03% over the last 12 months (as of 10/18/2021). XSW has traded between $117.97 and $181.83 in this past 52-week period.
The ETF has a beta of 1.16 and standard deviation of 27.91% for the trailing three-year period, making it a high risk choice in the space. With about 186 holdings, it effectively diversifies company-specific risk.
SPDR S&P Software & Services ETF holds a Zacks ETF Rank of 2 (Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, XSW is a great option for investors seeking exposure to the Technology ETFs segment of the market. There are other additional ETFs in the space that investors could consider as well.
Invesco Dynamic Software ETF (PSJ) tracks Dynamic Software Intellidex Index and the iShares Expanded TechSoftware Sector ETF (IGV) tracks S&P North American Technology-Software Index. Invesco Dynamic Software ETF has $471.92 million in assets, iShares Expanded TechSoftware Sector ETF has $5.87 billion. PSJ has an expense ratio of 0.56% and IGV charges 0.43%.
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.
Time to Invest in Legal Marijuana
If you’re looking for big gains, there couldn’t be a better time to get in on a young industry primed to skyrocket from $17.7 billion back in 2019 to an expected $73.6 billion by 2027.
After a clean sweep of 6 election referendums in 5 states, pot is now legal in 36 states plus D.C. Federal legalization is expected soon and that could be a still greater bonanza for investors. Even before the latest wave of legalization, Zacks Investment Research has recommended pot stocks that have shot up as high as +285.9%.
You’re invited to check out Zacks’ Marijuana Moneymakers: An Investor’s Guide. It features a timely Watch List of pot stocks and ETFs with exceptional growth potential.Today, Download Marijuana Moneymakers 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
The Trade Desk (TTD): Free Stock Analysis Report
iShares Expanded TechSoftware Sector ETF (IGV): ETF Research Reports
Invesco Dynamic Software ETF (PSJ): ETF Research Reports
Asana, Inc. (ASAN): Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research