Sectors allow targeted exposure to capture opportunities in market (be it sentiment, macro factors, themes, style). Across a fund range there is also the ability to play different parts of the business cycle in different regions, e.g. US vs. Europe.
Dispersion between sector returns
Dispersion of returns is a defining characteristic of sector investing. As different sectors have different drivers, their returns will diverge over a given period. According to S&P, the dispersion between sector returns accounts for roughly half of the dispersion between stock returns. This implies that half of the value added from picking stocks could be achieved with selecting the right sectors.
Diversification of risk1 Sector investment offers a lower concentration risk than individual stocks and helps avoid idiosyncratic risk associated with individual stocks.
Varied correlations between sectors Each sector has a different correlation with the overall market. Taking advantage of these differences could reduce risk in a portfolio.
Because sectors comprise companies with the same economic activities, there are often style characteristics in common. This knowledge can be utilised to implement an investment view, particularly related to macroeconomic factors.
Implementing Sector Investing
Harnessing the Power of Sector Investing Through ETFs
Investing in sectors can align portfolios with broader market trends, giving exposure to specific factors and styles.
Sectors are particularly well suited to target certain economic variables and, when accessed through ETFs, investors can implement macroeconomic views simply and cost-effectively.2
Sectors offer a selective exposure with opportunities to potentially benefit from significant return dispersion
Investing in sectors can provide a better means of capturing thematic trends than individual stocks
ETFs are attractive tools for implementing economic and broader market views
1 Diversification does not ensure a profit or guarantee against loss. 2 Frequent trading of ETFs could significantly increase commissions and other costs such that they may offset any savings from low fees or costs. 3 Source: State Street Global Advisors, as at 31 December 2019.
ETFs trade like stocks, are subject to investment risk, fluctuate in market value and may trade at prices above or below the ETFs net asset value. Brokerage commissions and ETF expenses will reduce returns. Changes in exchange rates may have an adverse effect on the value, price or income of an investment. Further there is no guarantee that an ETF will achieve its investment objective. SSGA SPDR ETFS MAY NOT BE AVAILABLE OR SUITABLE FOR YOU. THE VIEWS EXPRESSED/INFORMATION IN THIS SITE DOES NOT CONSTITUTE INVESTMENT ADVICE, FINANCIAL, LEGAL, REGULATORY, ACCOUNTING OR TAX ADVICE. INDEPENDENT ADVICE SHOULD BE SOUGHT IN CASES OF DOUBT. NEITHER THE INFORMATION NOR ANY OPINION CONTAINED ON THIS SITE CONSTITUTES A SOLICITATION OR OFFER TO BUY OR SELL SHARES OF THE FUNDS OR ANY OTHER FINANCIAL INSTRUMENT. Standard & Poor's®, S&P® and SPDR® are registered trademarks of Standard & Poor's Financial Services LLC (S&P); Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC (Dow Jones); and these trademarks have been licensed for use by S&P Dow Jones Indices LLC (SPDJI) and sublicensed for certain purposes by State Street Corporation. State Street Corporation's financial products are not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, their respective affiliates and third party licensors and none of such parties make any representation regarding the advisability of investing in such product(s) nor do they have any liability in relation thereto, including for any errors, omissions, or interruptions of any index.
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Information related to Mexico
This information does not constitute and is not intended to constitute marketing or an offer of securities and accordingly should not be construed as such. The Funds referenced herein have not been, and will not be, registered under the Mexican Securities Market Law (Ley del Mercado de Valores) and may not be publicly offered or sold in the United Mexican States. Disclosure documentation related to any of the aforementioned Funds may not be distributed publicly in Mexico and shares of the Funds may not be traded in Mexico.
European SPDR ETFs
SSGA SPDR ETFs Europe I Plc and SSGA SPDR ETFs Europe II Plc are investment companies with variable capital constituted as umbrella funds with segregated liability between sub-funds under the laws of Ireland and authorized by the Central Bank of Ireland pursuant to the European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations 2011.
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US SPDR ETFs
The US domiciled SPDR ETFs named on this site (excluding SPDR Gold Shares & SPDR Gold MiniShares Trust) are only permitted to be marketed into the relevant EEA jurisdiction pursuant to either Article 42 of AIFMD (as implemented under national laws of such member state); or (ii) can otherwise be lawfully offered or sold (including on the basis of an unsolicited request from a professional/Qualified investor). Some of the US domiciled SPDR ETFs mentioned in this site are alternative investment funds for the purpose of the European Union Alternative Investment Fund Managers Directive (Directive 2011/61/EU) (“AIFMD”). SSGA Funds Management, Inc. and State Street Global Advisors Trust Company are the alternative investment fund managers (“AIFMs”) of these Funds.
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