Designed to provide broad exposure to the Technology - Broad segment of the equity market, the Technology Select Sector SPDR ETF (XLK) is a passively managed exchange traded fund launched on 12/16/1998.
An increasingly popular option among retail and institutional investors, passively managed ETFs offer low costs, transparency, flexibility, and tax efficiency; they are also excellent vehicles for long term investors.
Sector ETFs are also funds of convenience, offering many ways to gain low risk and diversified exposure to a broad group of companies in particular sectors. Technology - Broad is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 8, placing it in top 50%.
Index Details
The fund is sponsored by State Street Global Advisors. It has amassed assets over $69.24 billion, making it the largest ETF attempting to match the performance of the Technology - Broad segment of the equity market. XLK seeks to match the performance of the Technology Select Sector Index before fees and expenses.
The Technology Select Sector Index includes companies from the following industries: computers & peripherals; software; diversified telecommunication services; communications equipment; semiconductor & semiconductor equipment; internet software & services; IT services; wireless telecommunication services; electronic equipment & instruments; and office electronics.
Costs
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive counterparts if all other fundamentals are the same.
Annual operating expenses for this ETF are 0.09%, making it one of the least expensive products in the space.
It has a 12-month trailing dividend yield of 0.52%.
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.
This ETF has heaviest allocation in the Information Technology sector--about 100% of the portfolio.
Looking at individual holdings, Microsoft Corp (MSFT) accounts for about 21.93% of total assets, followed by Nvidia Corp (NVDA) and Apple Inc (AAPL).
The top 10 holdings account for about 65.26% of total assets under management.
Performance and Risk
So far this year, XLK has gained about 16%, and is up about 34.27% in the last one year (as of 09/23/2024). During this past 52-week period, the fund has traded between $160.19 and $237.68.
The ETF has a beta of 1.13 and standard deviation of 25.27% for the trailing three-year period, making it a medium risk choice in the space. With about 70 holdings, it effectively diversifies company-specific risk.
Alternatives
Technology Select Sector SPDR ETF holds a Zacks ETF Rank of 1 (Strong Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, XLK is an outstanding 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.
IShares U.S. Technology ETF (IYW) tracks Dow Jones U.S. Technology Index and the Vanguard Information Technology ETF (VGT) tracks MSCI US Investable Market Information Technology 25/50 Index. IShares U.S. Technology ETF has $18.74 billion in assets, Vanguard Information Technology ETF has $76.30 billion. IYW has an expense ratio of 0.40% and VGT charges 0.10%.
Bottom Line
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Get it free >>Technology Select Sector SPDR ETF (XLK): ETF Research Reports
Apple Inc. (AAPL) : Free Stock Analysis Report
Microsoft Corporation (MSFT) : Free Stock Analysis Report
NVIDIA Corporation (NVDA) : Free Stock Analysis Report
iShares U.S. Technology ETF (IYW): ETF Research Reports
Vanguard Information Technology ETF (VGT): ETF Research Reports
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
