A major part of the appeal of Exchange Traded Funds, or ETFs, is the ability to place bets on the broad, over-arching movement of markets. ETFs are generally connected to a particular index and give investors a chance to speculate on broad market trends. However, ETFs can also be more specific, honing in on segments of the economy or specific sectors and moving in reaction to advances or retreats in that industry.
SPDR Funds to Play the Market
One of the industry leaders in creating ETFs is State Street Global Advisors (STT) . Their SPDR funds are widespread and some of the highest traded by volume. For each sector, there is a SPDR fund available that seeks to match the daily movement of the S&P index for that specific sector. By using these funds, an investor can make simple, direct bets about the success or failure of a specific industry in the short or long term. These SPDR funds are widely traded and well known, with SPDR serving as a trusted brand in the ETF market.
- Consumer Staples: The Consumer Staples Select Sector SPDR Fund ($XLP)
- Consumer Discretionary: The Consumer Discretionary Select Sector SPDR Fund ($XLY)
- Energy: The Energy Select Sector SPDR Fund (XLE)
- Financials: The Financial Select Sector SPDR Fund ($XLF)
- Healthcare: The Health Care Select Sector SPDR Fund ($XLV)
- Industrials: The Industrial Select Sector SPDR Fund ($XLI)
- Materials: The Materials Select Sector SPDR Fund (XLB)
- Technology: The Technology Select Sector SPDR Fund ($XLK)
- Telecommunications: The SPDR S&P Telecom ETF ($XTL)
- Utilities: The Utilities Select Sector SPDR Fund ($XLU)
With the notable exception of Telecommunications, where the iShares Dow Jones US Telecom ($IYZ) is the most-traded fund, SPDR Select Sector funds have the highest average trading volume of any sector-specific ETFs. However, while the SPDR brand is clearly a strong one, it's only scratching the surface of the ETF market has to offer. For the interested investor, a deeper look will reveal a menagerie of leveraged ETFs, inverse ETFs, and even more segment specific ETFs to invest in.