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In a world more and more controlled by megacap tech and AI-driven hype, the Xtrackers S&P 500 Diversified Sector Weight ETF (NASDAQ:SPXD) is quietly making its move – a balanced way to gain exposure to the S&P 500 without taking a ride on the Nvidia (NASDAQ:NVDA) rollercoaster.
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Investors tend to flock to broad-based ETFs, such as the SPDR S&P 500 ETF Trust (NYSE:SPY) and the Vanguard S&P 500 ETF (NYSE:VOO), for market exposure. Yet with Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT), Nvidia, and Amazon (NASDAQ:AMZN) sitting at the top, the traditional S&P 500 is starting to resemble the “S&P 5.” The increasing concentration risk has led many investors to question whether the diversification within the index is more myth than reality.
Enter SPXD, brought to market by Xtrackers and driven by an innovative indexing approach created by Syntax LLC. Instead of allocating weight evenly or by market capitalization, SPXD uses a hierarchical sector-weighting approach that digs down into business activities and revenue streams. The outcome? Exposure to actual economic activity, not mere buzz terms like “AI” and “cloud.”
As of July 24, the launch date, the fund’s largest holdings are Berkshire Hathaway (NYSE:BRK) (3.69%), Jabil Inc (NYSE:JBL) (1.71%), and Abbott Laboratories (NYSE:ABT) (1.68%), a far cry from the tech-dominated roster of legacy S&P 500 funds. There is a bit of tilt toward information technology, but industrials, financials, consumer staples and healthcare all receive decent representation.
And to top it off, even with its differentiated strategy, SPXD remains an affordable option. Its cost ratio is a mere 0.09%, tied with SPY’s. That’s no small accomplishment for an ETF with a new passive approach, particularly in an era where active management fees have a tendency to creep into portfolios like unwanted dinner guests.
For investors who fear a tech bubble déjà vu or want smoother rides through market volatility, SPXD could be the index ETF with a seatbelt installed.
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