The ETF, SPY represents the bellweather, the S&P 500 Index, which is a diversified large cap U.S. index that holds companies across all eleven sectors. One sector represented with a significant weighting is information technology.
The Index seeks to provide an effective representation of the technology and telecom sector of the S&P 500 Index with exposure to technology hardware, storage, communications equipment, semiconductors, etc.
So when I heard the XLK was at all-time highs,
and the NASDAQ wasn’t,
I was intrigued. However, it all made sense after looking at the top 10 holdings of the XLK.
We live in a cashless society, so I wasn’t surprised to see Visa
and Mastercard (the real winner of Apple Pay) at all-time highs as well.
But I was surprise to see the old Dog, Microsoft at all-time highs.
Even more surprised to see what I thought was a dying Dog, Oracle at all-time highs as well.
So the lesson of this post is to know what’s under the hood of the car.
Meaning know the holdings of your ETFs because the weight is assigns the stocks it holds can skew the result in either direction. And longer term with my new found knowledge, I would rather own the XLK over the ETF, the QQQs because it’s less volatile as it doesn’t rely on the majority of the FANG stocks for its returns.
This post is my personal opinion. I’m not a financial advisor, this isn’t financial advise. Do your own research before making investment decisions.