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.
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.
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.
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%.
The State Street exchange traded entities may be purchased in ’round lots’ of 100 shares or smaller with the minimum number being one share.
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 ETF||Ticker||Inception||Benchmark Index||Benchmark Index Feature|
|Consumer Discretionary Select Sector SPDR||XLY||12/16/1998||S&P Consumer Discretionary Select Sector Index||Market-cap weighted index of specialty & multiline retailers, media and leisure companies, hotels and restaurants|
|SPDR S&P Homebuilders ETF||XHB||01/31/2006||S&P Homebuilders Select Industry Index||Equal-weighted index of home builders, building products retailers, and building products manufacturers|
|SPDR S&P Retail ETF||XRT||06/19/2006||S&P Retail Select Industry Index||Equal-weighted index of discount and specialty retailers, drug stores, and supermarkets|