The
S&P 500 index is one of the most popular indexes in the world. It is used by
many professional and retail investors to analyze the health of the U.S.
economy. At the same time, the S&P 500 is the world's leader in most traded ETFs
(Exchange Traded Funds). The SPY stock (SPDRs index funds) tracks the
performance of the S&P 500 index and is the most traded stock in volume.
The S&P 500 index is unique as it is divided into nine sector indexes with
corresponding nine sector SPDRs index funds. Because of the wide range of ETFs,
investors are not limited to SPY (the S&P 500 index tracking stock), but can
invest in a particular sector or industry group: XLF (ETF, which tracks the S&P
500 Financial sector), XLE (ETF, which tracks the S&P 500 Energy sector) and
others.
The S&P 500 sector indexes and corresponding sector SPDRs funds enable you to
invest in the stocks of the S&P 500 with the ability to give greater or lower
weight to particular sectors or industry groups based on your investment goals
and trading strategies.
The nine S&P 500 sector indexes and Select Sector funds are:
S&P 500 Sector Index
SPDRs Sector Fund
Symbol / Root
S&P Consumer Discretionary
Index
Consumer Discretionary Select Sector SPDR Fund
XLY
S&P Consumer Staples Index
Consumer Staples Select Sector SPDR Fund
XLP
S&P Energy Index
Energy Select Sector SPDR Fund
XLE
S&P Financial Index
Financial Select Sector SPDR Fund
XLF
S&P Health Care Index
Health Care Select Sector SPDR Fund
XLV
S&P Industrial Index
Industrial Select Sector SPDR Fund
XLI
S&P Materials Index
Materials Select Sector SPDR Fund
XLB
S&P Technology Index
Technology Select Sector SPDR Fund
XLK
S&P Utilities Index
Utilities Select Sector SPDR Fund
XLU
In 2003, a new S&P 500 Retail Composite was introduced. It is a combination of
stocks in two S&P 500 sectors - the S&P Consumer Discretionary Sector and the
Consumer Staples Sector. The S&P 500 Retail Index is comprised of all
constituent companies of these two consumer-oriented indices. The launch of this
new index did not end the old sector indexes. Standard & Poor's continues to
maintain and calculate the Consumer Discretionary and Consumer Staples indexes.
In addition, the XLY and XLP exchange traded funds continue to be available for
trading along with XRT (Retail Sector SPDRs Fund).
The S&P Select Sector Indexes are calculated by using a modified "market
capitalization" methodology wherein each stock is represented in a proportion
equivalent to its percentage of the total market cap. The Select Sector SPDRs
Exchange Traded Funds track corresponding indexes and, in keeping with the
Internal Revenue Code, each ETF price should not exceed 25% of its benchmark
index value.
The S&P Select Sector SPDRs are set to track the price performance and dividend
yield of a particular S&P 500 Sector Index. Each S&P Sector index is comprised
principally of shares of companies from the S&P 500 index and each stock in the
S&P 500 is allocated to one Sector Index only. The combined stocks of all S&P
Sector Indexes represent the S&P 500 index.
