The Financial Select Sector SPDR Fund (NYSE:XLF) is an Exchange Traded Fund (ETF) that seeks to provide investment results that correspond to the price and yield performance of the Financial Select Sector of the S&P 500 Index. The Index includes a broad range of financial service firms including banks, brokerage houses, insurance and other diversified financial holding companies.
ETFs utilize a passive investment approach to invest in a portfolio of stocks that seek to replicate the underlying index, in this case the underlying index is the Financial Select Sector S&P 500 Index.
Current as of 7/19/2010
|J P Morgan Chase (JPM)||9.85%|
|Bank of America (BAC)||8.91%|
|Wells Fargo (WFC)||8.69%|
|Berkshire Hathaway (BRK)||8.11%|
|Goldman Sachs Group (GS)||4.78%|
|American Express Company (AXP)||3.16%|
|U.S. Bancorp (USB)||2.81%|
|Morgan Stanley (MS)||2.20%|
|Bank of New York Mellon Corporation (BK)||1.98%|
|Diversified Financial Services||28.3%|
|Real Estate Investment Trusts (REITs)||7.5%|
|Thrifts & Mortgage Finance||0.4%|
|Real Estate Management and Development||0.2%|
Sector investing is popular as various sectors of the economy may rise and fall in response to different economic factors. Some sectors will be counter-cyclical to other sectors.
ETFs have become so popular that new ones are coming to market rather frequently. The latest version includes “leveraged ETFs” and “inverse ETFs.”
A leveraged ETF seeks to match some multiple of the underlying index. For example, PowerShares QQQ Trust (NASDAQ: QQQ) is an ETF that seeks daily investment results that correspond to the daily performance of the NASDAQ-100 Index. ProShares Ultra QQQ (NYSE: QLD) seeks to double the performance of the QQQ.
An inverse ETF seeks to match the performance of an index, but in the inverse direction. This is normally accomplished by short-selling either the index or the underlying assets. For example, ProShares UltraShort QQQ (NYSE: QID) seeks to double the performance of the NASDAQ-100 Index in the inverse direction. If the NASDAQ-100 is up 5% the ProShares UltraShort QQQ should be down by 10%.