ETFs are like a hybrid between a mutual fund and traditional equity shares. ETFs hold assets such as stocks, commodities, bonds and even options or futures. They are designed to trade close to the net asset value, or NAV, of what they hold and intend on tracking over the course of the trading day, much like common equity would.
ETFs are different from a traditional open-end mutual fund, which does not trade throughout the day, but instead adjusts its price after the markets close, then changing to reflect the NAV changes that occurred to its holdings that day.
Other differences exist between most ETFs and mutual funds, including that several ETFs have considerably lower management fees. This is not always the case, and several mutual funds offer competitive fees, while some ETFs have fairly high fees. Additionally, most ETFs are designed to track some index, and do not allow for active management that may outperform or underperform that index.
Some of the most popular ETFs are the Select Sector SPDRs, also called the sector spiders. The sector spiders have average daily trading volumes between about seven and seventy million shares trading on NYSE Arca. This means that these ETFs are generally liquid. The sector ETFs divide the S&P 500 into nine sector-based index funds, and the nine would also combine to form the S&P 500. These sector ETFs would allow an investor to overweight or underweight particular sectors to meet tailored investment objectives and strategies.
This is a review of the recent performance of each of these sector ETFs. This information is useful not only in determining the general performance of these ETFs and the underlying equities, but it should also help investors delineate which sectors of the S&P are under-performing or over-performing the broader market now. Such information could help investors reallocate to maximize returns.
Below I have listed the present yield, as well as the 1-month and 2012-to-date and 1-year performance rates. The 2012-to-date numbers are also the first quarter performance rates.
Consumer Staples Sector (XLP)
- Yield: 2.71%
- 1-month: 2.71%
- 2012-to-date: 4.88%
- 1-year: 14.78%
Consumer Discretionary Sector (XLY)
- Yield: 1.3%
- 1-month: 3.56%
- 2012-to-date: 15.58%
- 1-year: 16.21%
Energy Sector (XLE)
- Yield: 1.8%
- 1-month: -5.12%
- 2012-to-date: 3.75%
- 1-year: -8.83%
Financial Sector (XLF)
- Yield: 1.06%
- 1-month: 5.75%
- 2012-to-date: 21.37%
- 1-year: -3.43%
Healthcare Sector (XLV)
- Yield: 1.92%
- 1-month: 3.35%
- 2012-to-date: 8.35%
- 1-year: 15.06%
Industrial Sector (XLI)
- Yield: 1.88%
- 1-month: 0.16%
- 2012-to-date: 10.86%
- 1-year: 0.86%
Materials Sector (XLB)
- Yield: 3.4%
- 1-month: -1.1%
- 2012-to-date: 10.35%
- 1-year: -5.75%
Technology Sector (XLK)
- Yield: 1.36%
- 1-month: 3.54%
- 2012-to-date: 18.46%
- 1-year: 16.5%
Utilities Sector (XLU)
- Yield: 4.04%
- 1-month: 0.2%
- 2012-to-date: -2.58%
- 1-year: 11.66%
The worst performing sector thus far in 2012 is the utilities sector. although it is only down 2.58 percent for the first quarter of 2012, it is the only sector that is negative. Meanwhile, five of the nine sectors were up double digits within Q1 2012, with the best performer being the financials ETF, XLF, which gained 21.37 percent in the first quarter.
The second best performing sector ETF was the technology spider, XLK, up 18.46 percent for the quarter, followed by the consumer discretionary spider, XLY, up 15.58 percent. Technology and consumer discretionary are also the two best performing sectors over the last full year.
Each of these SPDR sector ETFs has an expense ratio of 0.2 percent, which is below average for a mutual fund, where annual fees are often about or over 1 percent.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Disclaimer: This article is intended to be informative and should not be construed as personalized advice as it does not take into account your specific situation or objectives.
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