There’s been a lot of uncertainty in the market lately, and even that sounds like an understatement.
Between fluctuating signals, geopolitical conflicts and all the reality-TV-worthy drama in the White House, it feels like we’re entering a strange new world, without a clear map to guide us through it. Personally, I’m not a fan of all this market turmoil, but I do know that in times of uncertainty, we often cling to what’s familiar.
Familiarity can offer security, especially in the market. And that’s where today’s exchange-traded fund comes in: the Technology Select Sector SPDR Fund (XLK). Founded in 1998, XLK was the first ever exchange-traded fund to launch in the technology space.
As a consequence of this milestone, its focus on the U.S. technology segment is narrower than its contemporaries. XLK excludes small- and mid-cap stocks, and entirely consists of stocks in the S&P 500. XLK’s heavily concentrated nature also leads to a few “misfit” stocks, including financial payment processors and telecom firms.
However, this strict adherence to large-caps helps the ETF avoid smaller, less-stable firms, resulting in lower volatility and a tilt toward value. In fact, XLK long held the title as the cheapest and largest fund in its segment.
XLK has $73.75 billion in assets under management and an expense ratio of 0.09%, which is incredibly low. Its primary sector is, of course, technology, with electronic technology taking up the largest share at 52.73% of its holdings. Its top 10 holdings are some of the biggest names in the technology world, consisting of Microsoft Corporation (NASDAQ: MSFT), NVIDIA Corporation (NASDAQ: NVDA), Apple Inc. (NASDAQ: AAPL), Broadcom Inc. (NASDAQ: AVGO), Oracle Corporation (NYSE: ORCL), Cisco Systems, Inc. (NASDAQ: CSCO), Salesforce, Inc. (NYSE: CRM), International Business Machines Corporation (NYSE: IBM), Palantir Technologies Inc. Class A (NASDAQ: PLTR) and Intuit Inc. (NASDAQ: INTU).
Chart courtesy of Stockcharts.com.
The fund is up 10.08% over the last month, 9.79% over three months and 3.19% year to date.
In seeking security from the familiar choices, it’s important to make sure that it offers the shelter you really need. Investors should always do their due diligence before adding any stock, fund or ETF to their portfolio.
As always, I am happy to answer any of your questions about ETFs, so do not hesitate to send me an email. You just may see your question answered in a future ETF Talk.
