Simplify your technology investing
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As you may know, the Vanguard Information Technology ETF (VGT) is one of my favorite ETFs. I wrote an article about it and the Vanguard S&P 500 ETF (VOO). When it comes to the Global Industry Classification Standard (GICS), there are 11 sectors. Information Technology is one of those 11 sectors. Within the Information Technology sector, there are 3 industry groups, which are Software & Services, Technology Hardware & Equipment, and Semiconductors & Semiconductor Equipment.
For each of these industry groups, there are indices that measure the performance of the companies in them. The key Software & Services index is the S&P Software & Service Select Industry Index, the key Technology Hardware & Equipment index is the S&P Technology Hardware Select Industry Index, and the key Semiconductors & Semiconductor Equipment is the S&P Semiconductor Select Industry Index.
For those 3 indices, each has a specific ETF that tracks its performance, allowing an investor to gain exposure to the industry groups easily. The SPDR S&P Software & Services ETF (XSW) tracks the performance of the S&P Software & Service Select Industry Index, the SPDR S&P Technology Hardware ETF (XTH) tracks the S&P Technology Hardware Select Industry Index, and the SPDR S&P Semiconductor ETF (XSD) tracks the performance of the S&P Semiconductor Select Industry Index.
XTH was discontinued by State Street Global Advisors, a subsidiary of State Street, on Friday, May 29th. State Street Global Advisors also manages XSW and XSD. Trading for all share of XTH was suspended at market open on Monday, June 1st. Shareholders received their proceeds of the liquidation by Monday, June 8th. That is why the focus of this article will be on XSW and XSD.
1. SPDR S&P Software & Services ETF (XSW)
XSW tracks the performance of the S&P Software & Service Select Industry Index. As of the market close on Friday, August 8th, the price of XSW was $119.30, and its expense ratio was 0.35%.
XSW was incepted on September 28th, 2011. Since its inception, XSW has provided a total return of approximately 427% and an average annualized return of approximately 21% with dividends reinvested.
Companies in XSW include Digital Turbine, Avalara, Cloudflare, Square, and Model N.
2. SPDR S&P Semiconductor ETF (XSD)
XSD tracks the performance of the S&P Semiconductor Select Industry Index. As of the market close on Friday, August 8th, the price of XSD was $125.95, and its expense ratio was 0.35%.
XSD was incepted on January 31st, 2006. Since its inception, XSD has provided a total return of approximately 417% and an average annualized return of approximately 12% with dividends reinvested.
Companies in XSD include Monolithic Power Systems, Xilinx, Qualcomm, NVIDIA, and Micron Technology.
As stated earlier, both XSW and XSD are managed by State Street Global Advisors, a subsidiary of State Street. State Street is one of the largest asset management firms in the world by assets under management alongside companies such as BlackRock, Vanguard, Charles Schwab, UBS, and Fidelity.
Being one of the largest asset management firms in the world by assets under management helps to assist further the quality of the company and the quality of its ETFs such as XSW and XSD. Even though both ETFs have had stellar performance since their inceptions, it is always important to do your research and due diligence before investing.
In doing in-depth research on XSW and XSD, you will start to learn more about the Information Technology companies that are not household names. In becoming understanding of the wider array of technology companies in the market, you are further improving your knowledge about different classifications of the market.
ETFs like XSW and XSD can also further simplify your investment research. Instead of trying to pick companies to do research on manually, you can look into the top 10 holdings of each ETF, which gives you 20 companies to research. There are many ways to invest and learn about companies. ETFs are one of my favorite ways to become aware of companies I did not know were publicly-traded, or I have never heard about.
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