Investing is hot sectors and staying out of cold sectors can magnify gains in your portfolio. By using Exchange Traded Funds (ETFs) to invest in sectors rather than picking a specific stock, you’ll eliminate the chance of picking the one underperformer but at the same time you’ll also miss the biggest out performer. By just picking a sector, you eliminate a lot of research that must be done on all the stocks within the sectors and just focus on the sector itself. So, how do you invest in sectors using ETFs?
I choose Select Sector SPDRs to do my sector investing. Select Sector breaks the S&P 500 up into 9 different sectors allowing you to invest in each of these sectors by using an exchange traded fund. Why Select Sector SPDRs? One of the main reasons why I use them is their liquidity. Because they are exchange traded funds, they trade like stocks not mutual funds. ETFs allow you to get in and out of the market rather than waiting, like mutual funds, for end of day transactions. This allows short term traders the ability to hop in and out of sectors taking advantage of short term moves but they also offer longer term investors the ability to get in and out of longer term sector rotations.
Select Sector Spiders has 9 ETFs available:
XLB – Tracks Materials Sector
XLE – Tracks Energy Sector
XLF – Tracks Financial Sector
XLI – Tracks Industrial Sector
XLK – Tracks Technology Sector
XLP – Tracks Consumer Staples Sector
XLU – Tracks Utilities Sector
XLV – Health Care Sector
XLY – Track Consumer Discretionary Sector
Select Sector Spiders break up the S&P 500 into 9 sectors. Unlike most ETFs, with these spiders you can view the ETF’s’ holdings daily. With most ETFs, except index fund, you just know the top 10 holdings. There are more detailed ETFs that focus on sectors within sectors but Select Sector Spiders will give you a good start in broad based sector investing.
Tags: ETFs, InvestingStumble it!
Digg This Article
Subscribe To The DailyMoneyAdvice.com Feed