The S&P 500 index is one of the popular indexes from the Standard & Poor’s group of U.S. and Global indexes which is used by many institutional, professional and retail traders to analyze and evaluate the health of the U.S. economy. At the same time it is one of the most traded indexes in the world. The SPY (SPDRs) stock is the most active stock by trading volume.
The uniqueness of the S&P 500 index is that it is divided into 9 sector indexes with 9 corresponding SPDRs sector funds. This gives ability to invest in specific S&P 500 sector or industry group and meet specific investment goals. S&P 500 sector indexes and Select Sector SPDRs became very popular. The XLF (The Financial Select Sector SPDR Fund that tracks the S&P Financial index) is second most traded stock which is even more active than QQQQ (NASDAQ 100 tracking stock).
The Select Sector SPDRs allow investors to invest not just into the S&P 500 stocks but adjust the investment by over-weighting or under-weighting particular sectors based on the personal investment goals and trading strategies.
The nine S&P 500 Sector indexes and Select Sector funds are:
1. The Consumer Discretionary Select Sector SPDR Fund – XLY – tracks the S&P 500 Consumer Discretionary index.
2. The Consumer Staples Select Sector SPDR Fund – XLP – tracks the S&P 500 Consumer Staples index.
3. The Energy Select Sector SPDR Fund – XLE – tracks the S&P 500 Energy index.
4. The Financial Select Sector SPDR Fund – XLF – tracks the S&P 500 Financial Index.
5. The Health Care Select Sector SPDR Fund – XLV – tracks the S&P 500 Health Care index.
6. The Industrial Select Sector SPDR Fund – XLI – tracks the S&P 500 Industrial Index.
7. The Materials Select Sector SPDR Fund – XLB – tracks the S&P 500 Materials index.
8. The Technology Select Sector SPDR Fund – XLK – Tracks the S&P 500 Technology index.
9. The Utilities Select Sector SPDR Fund – XLU – tracks the S&P 500 Utilities index.
In 2003, a new S&P 500 Retail Composite and new retail Sector SPDRs Fund were introduced. The S&P 500 Retail index is a combination of companies in two S&P 500 Industry Group Indices — Retailing and Food & Drug Retail. The S&P 500 Retail Index is comprised of all constituent companies of the two retail-oriented indices. This new index increase the number of the S&P 500 sector indexes and select sector funds from nine to ten.
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