Should You Invest in the SPDR S&P Software & Services ETF (XSW)?
Retail and institutional investors increasingly turn to passively managed ETFs because they offer low costs, transparency, flexibility, and tax efficiency; these kind of funds are also excellent vehicles for long term investors.
Additionally, sector ETFs offer convenient ways to gain low risk and diversified exposure to a broad group of companies in particular sectors. Technology - Software is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 6, placing it in top 38%.
Index Details
The fund is sponsored by State Street Investment Management. It has amassed assets over $477.14 million, making it one of the average sized ETFs attempting to match the performance of the Technology - Software segment of the equity market. XSW seeks to match the performance of the S&P Software & Services Select Industry Index before fees and expenses.
The S&P Software & Services Select Industry Index represents the software sub-industry portion of the S&P Total Stock Market Index. The S&P TMI tracks all the U.S. common stocks listed on the NYSE, AMEX, NASDAQ National Market and NASDAQ Global Select Market. The Software Index is a modified equal weight index.
Costs
Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.
Annual operating expenses for this ETF are 0.35%, making it one of the least expensive products in the space.
It has a 12-month trailing dividend yield of 0.06%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
This ETF has heaviest allocation in the Information Technology sector -- about 96.8% of the portfolio.
Looking at individual holdings, Bigbear.ai Holdings Inc (BBAI) accounts for about 1.34% of total assets, followed by Cipher Mining Inc (CIFR) and Oracle Corp (ORCL).
The top 10 holdings account for about 9.46% of total assets under management.
Performance and Risk
So far this year, XSW has lost about 2.88%, and is up roughly 28.48% in the last one year (as of 08/06/2025). During this past 52-week period, the fund has traded between $141.65 and $204.72.
The ETF has a beta of 1.18 and standard deviation of 26.67% for the trailing three-year period, making it a high risk choice in the space. With about 142 holdings, it effectively diversifies company-specific risk.
Alternatives
SPDR S&P Software & Services ETF holds a Zacks ETF Rank of 1 (Strong Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, XSW is an excellent option for investors seeking exposure to the Technology ETFs segment of the market. There are other additional ETFs in the space that investors could consider as well.
Invesco AI and Next Gen Software ETF (IGPT) tracks STOXX WORLD AC NEXGEN SOFTWARE DEV ID and the iShares Expanded Tech-Software Sector ETF (IGV) tracks S&P North American Technology-Software Index. Invesco AI and Next Gen Software ETF has $500.03 million in assets, iShares Expanded Tech-Software Sector ETF has $11.36 billion. IGPT has an expense ratio of 0.58%, and IGV charges 0.41%.
Bottom Line
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.
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SPDR S&P Software & Services ETF (XSW): ETF Research Reports
This article originally published on Zacks Investment Research (zacks.com).
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