SPDRs are exchange-traded funds (ETFs) that categorize the market into 11 sectors. ETFs are groups of stocks that can be bought and sold on the open exchange during regular trading hours, just like any stock. SPDR’s market sectors include technology, materials, consumer staples, consumer discretionary, industrials, communication, health care, financials, real estate, energy, and utilities.
SPDR S&P 500 and Sectors
SPDRs started in 1993 with the S&P 500 (SPY) on the American Stock Exchange (AMEX). The S&P 500 (SPY) is SPDR’s ETF of 500 large-cap US companies. Together, their values make up about 80% of the overall market. Today, SPDR also has ETFs for mid-cap and small-cap companies, international equity, and various other markets.
Because the S&P 500 is market cap-weighted, the influence of any individual stock on it is determined by its market capitalization, which is the share price multiplied by the number of shares outstanding. As of December 23, 2022, its top five companies are Apple, Microsoft, Amazon, Meta Platforms A, and Alphabet Class A. In total, they hold approximately 20% of the total ETF.
Sector Selection
Selecting an industry is similar to choosing individual stocks. Financial advisors account for composite earnings, industry trends, and financial projections. If the industry is growing faster than others, but at a reasonable rate compared to its sector, it may be undervalued. Advisors also compare numerous industry or sector financial ratios with others’.
Getting Started
SPDR’s S&P 500 and sector ETFs are a possible way to diversify. The investments appeal to those who do not have time to conduct thorough research and analysis on individual stocks. To get in touch with First State’s experienced Tulsa wealth advisors and build a portfolio, contact us today at (918) 492-1361.
This overview is for informational purposes only and is not a recommendation. It should not be the sole deciding factor in making an investment. Investing is a risk and, as with all risks, a positive return is not guaranteed. Past performance does not indicate future results.