SPDR ETF – Select Sector SPDR – SPDR Gold Shares

A Sector Investing Perspective on SPDR ETF, Select Sector SPDR ETF, and SPDR Gold Shares

State Street is involved in the management and marketing of several exchange-traded funds (ETFs) through its subsidiary, State Street Global Advisors (SSgA). Sector ETFs, industry-group ETFs, and a commodity trust are offered.

Breadth of Sector ETFs

Ten sector ETFs are offered, nine under the Select Sector SPDR series. Fourteen industry-group ETFs are available, eight under the SPDR S&P series and four under the KBW series. SPDR Gold Shares is the sole commodity trust.

Investment Approach

The State Street ETFs and the SPDR Gold commodity trust take an indexed or ‘passive’ approach to investing. The benchmark index used depends on the type of exchange traded entity.

Select Sector SPDR

The Select Sector SPDRs are ETFs that result from the division of the Standard & Poor’s 500 index into nine sector indexes. All stocks within each sector are allocated to the corresponding Select Sector SPDR ETF. Each Select Sector SPDR ETF is designed to track the total return performance of the corresponding S&P Select Sector index.

SPDR S&P ETF

The eight industry-group SPDR S&P ETFs are designed to track the total return performance of the corresponding S&P Select Industry Index. Each S&P Select Industry Index represents the industry’s portion of the S&P Total Market Index. The S&P Total Market Index includes companies of all market capitalizations.

Other ETFs

State Street offers ETFs in the financial and technology sectors that use benchmarks developed by Keefe, Bruyette, & Woods (KBW), Dow Jones & Co., and Morgan Stanley.

SPDR Gold Shares

SPDR Gold Shares represent units of fractional undivided beneficial ownership of the SPDR Gold Trust. The London PM fix for gold is used as the basis for determining the net asset value of the SPDR Gold Shares.

Expense Ratio

The State Street exchange traded entities have expense ratios ranging up to 0.6%. The Select Sector SPDR ETFs typically have an expense ratio of 0.24% while the SPDR S&P and KBW industry-group ETFs typically have a 0.35% expense ratio. The SPDR Gold Trust’s expense ratio is 0.4%.

Trading Size

The State Street exchange traded entities may be purchased in ’round lots’ of 100 shares or smaller with the minimum number being one share.

AlphaProfit Take

Exchange-traded funds and commodity trust managed or marketed by entities of State Street Bank, the largest custodian and investment manager of institutional assets worldwide, have carved out a major share for themselves. As evident from the trading volumes, the Select Sector SPDR ETFs launched in late 1998 are popular with sectors investors. Comprising of S&P 500 member companies, the Select SPDR ETFs have low expense ratios and are a suitable option for investors seeking exposure to broad sectors.

Launched in late 2004, the SPDR Gold Shares are a hit with investors. This exchange traded commodity trust allows investors to profit from changes in the price of gold without venturing into the spot or futures markets.

State Street entities have also introduced a limited number of industry-group ETFs under the SPDR S&P and the KBW series. Like Select Sector SPDR ETFs, the SPDR S&P ETFs and the KBW ETFs tend to have relatively low expense ratios. The popularity of the industry group ETFs is likely to grow over time.

AlphaProfit Newsletter and SPDR ETF Recommendations

AlphaProfit Sector Investors’ Newsletter is the premier resource for sector investors. The Newsletter offers SPDR exchange traded fund recommendations. The Newsletter and its model portfolios have frequently been ranked #1 by Hulbert Financial Digest.

About AlphaProfit MoneyMatters

AlphaProfit MoneyMatters is a free e-letter distributed to registered users of AlphaProfit’s website. The e-letter analyzes the economy, markets, and sectors and provides money-making insights on stocks, exchange-traded funds, and mutual funds. AlphaProfit MoneyMatters is edited by Dr. Sam Subramanian acclaimed for his financial acumen and analytical skills. Sign Up for ETF Newsletter.

 SPDR ETFTickerInceptionBenchmark IndexBenchmark Index Feature
Consumer Discretionary Select Sector SPDRXLY12/16/1998S&P Consumer Discretionary Select Sector IndexMarket-cap weighted index of specialty & multiline retailers, media and leisure companies, hotels and restaurants
SPDR ETF Consumer DiscretionarySPDR S&P Homebuilders ETFXHB01/31/2006S&P Homebuilders Select Industry IndexEqual-weighted index of home builders, building products retailers, and building products manufacturers
SPDR S&P Retail ETFXRT06/19/2006S&P Retail Select Industry IndexEqual-weighted index of discount and specialty retailers, drug stores, and supermarkets
 

Must-read Articles on Sector Investing

Using Sector Funds to Construct Diversified Mutual Fund Portfolios

High-potential diversified portfolios can be constructed by dividing assets among a group of sector funds. This approach gives the investor flexibility to over-weight or under-weight certain sectors versus broadly diversified indexes. 'Sector funds are too risky.' 'I doubled my money with Fidelity Select Technology in 12 months!' 'Avoid sector funds.' If all of this sounds confusing, you are not alone.

Sector Mutual Funds: How to Pick Winning Sector Funds and Avoid Losers

If you are looking to earn great returns from the stock market sector mutual funds are right up your alley. Sophisticated investors recognize the potential sector mutual funds offer and know how to make such funds work for them. You can consistently beat the market by investing in the right sector mutual fund at the right time. In fact, you can make money even in bear markets.

Sector ETFs: Invest in the Best Sector ETF Consistently

Sector ETFs are among the most potent investment vehicles that allow individual investors to exploit advantages previously available only to large institutions. You can beat the market by investing in the right sector ETF at the right time. In fact, you can actually make money even when the overall market is tanking. However all too often, investors use sector ETFs inappropriately and get their fingers burnt.

New ETF and Mutual Fund Recommendations

The Fidelity and ETF Core and Focus model portfolios have gained at annualized rates of 14.5% and 17.7%, respectively since 1994. The model portfolios will be repositioned with new mutual fund and ETF recommendations on Monday, September 30. Learn more about AlphaProfit's Free and Premium Service investment newsletters.

Recent MoneyMatters Blog Posts