Should You Invest in the State Street SPDR S&P Software & Services ETF (XSW)?

If you're interested in broad exposure to the Technology - Software segment of the equity market, look no further than the State Street SPDR S&P Software & Services ETF (XSW), a passively managed exchange traded fund launched on September 28, 2011.

While an excellent vehicle for long term investors, passively managed ETFs are a popular choice among institutional and retail investors due to their low costs, transparency, flexibility, and tax efficiency.

Sector ETFs are also funds of convenience, offering many 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 2, placing it in top 13%.

Index Details

The fund is sponsored by State Street Investment Management. It has amassed assets over $507.21 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

Expense ratios are an important factor in the return of an ETF and in the long term, cheaper funds can significantly outperform their more expensive counterparts, other things remaining the same.

Annual operating expenses for this ETF are 0.35%, making it one of the least expensive products in the space.

Sector Exposure and Top Holdings

ETFs offer a diversified exposure and thus minimize single stock risk but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.

This ETF has heaviest allocation in the Information Technology sector -- about 96.5% of the portfolio.

The top 10 holdings account for about 10.34% of total assets under management.

Performance and Risk

So far this year, XSW has added about 7.06%, and it's up approximately 9.37% in the last one year (as of 08/17/2026). During this past 52-week period, the fund has traded between $135.97 and $205.24.

The ETF has a beta of 1.16 and standard deviation of 26.71% for the trailing three-year period, making it a high risk choice in the space. With about 135 holdings, it effectively diversifies company-specific risk.

Alternatives

State Street SPDR S&P Software & Services ETF holds a Zacks ETF Rank of 2 (Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, XSW is a great 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 $1.24 billion in assets, iShares Expanded Tech-Software Sector ETF has $14.45 billion. IGPT has an expense ratio of 0.56%, and IGV charges 0.39%.

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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This article originally published on Zacks Investment Research (zacks.com).

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