Primary US Sector ETFs

Primary US Sector ETFs List
(click on symbol for data and articles)

Claymore Super Sector ETFs
Claymore/Morningstar Information Super Sector Index ETF (MZN)
Claymore/Morningstar Services Super Sector Index ETF (MZO)
Claymore/Morningstar Manufacturing Super Sector Index ETF (MZG)

iShares Dow Jones Sector ETFs
iShares Dow Jones U.S. Basic Materials Sector Index Fund ETF (IYM)
iShares Dow Jones U.S. Consumer Goods Sector Index Fund ETF (IYK)
iShares Dow Jones U.S. Consumer Services Sector Index Fund ETF (IYC)
iShares Dow Jones U.S. Energy Sector Index Fund ETF (IYE)
iShares Dow Jones U.S. Financial Services Index Fund ETF (IYG)
iShares Dow Jones U.S. Healthcare Sector Index Fund ETF (IYH)
iShares Dow Jones U.S. Industrial Sector Index Fund ETF (IYJ)
iShares Dow Jones U.S. Utilities Sector Index Fund ETF (IDU)
iShares Dow Jones U.S. Telecommunications Sector Index Fund ETF (IYZ)
iShares Dow Jones Transportation Average Index Fund ETF (IYT)

Merrill Lynch HOLDRs
Biotech HOLDRs (BBH)
Broadband HOLDRs (BDH)
B2B HOLDRs (BHH)
Internet HOLDRs (HHH)
Internet Architecture HOLDRs (IAH)
Internet Infrastructure HOLDRs (IIH)
Oil Services HOLDRs (OIH)
Pharmaceutical HOLDRs (PPH)
Regional Bank HOLDRs (RKH)
Retail HOLDRs (RTH)
Semiconductor HOLDRs (SMH)
Software HOLDRs (SWH)
Telecom HOLDRs (TTH)
Utilities HOLDRs (UTH)
Wireless HOLDRs (WMH)

State Street Global Advisors Sector ETFs
Consumer Discretionary Select Sector SPDR ETF (XLY)
Consumer Staples Select Sector SPDR ETF (XLP)
Energy Select Sector SPDR ETF (XLE)
Financial Select Sector SPDR ETF (XLF)
Health Care Select Sector SPDR ETF (XLV)
Industrial Select Sector SPDR ETF (XLI)
Materials Select Sector SPDR ETF (XLB)
Technology Select Sector SPDR ETF (XLK)
Utilities Select Sector SPDR ETF (XLU)

Vanguard Sector ETFs
Vanguard Consumer Discretionary ETF (VCR)
Vanguard Consumer Staples ETF (VDC)
Vanguard Energy ETF (VDE)
Vanguard Financials ETF (VFH)
Vanguard Health Care ETF (VHT)
Vanguard Industrials ETF (VIS)
Vanguard Information Technology ETF (VGT)
Vanguard Materials ETF (VAW)
Vanguard Telecommunciation Services ETF (VOX)
Vanguard Utilities ETF (VPU)

What Are They?

• Primary sector ETFs are the ETFs that give you exposure to an entire US sector, not the sub-sectors and not narrow themes within the sector. For example, a primary sector ETF is "Technology", not "Software" and not "Enterprise Software".
• Primary sector ETFs are generally market-cap weighted, meaning that larger companies have greater representation in the index, and if a stock's price rises fast, its weighting in the index rises.

Why & How To Use Them

• There are three ways to use sector ETFs: (1) for short term trading, (2) to overweight one or a couple of sectors in a long term portfolio by adding a single sector ETF to a portfolio of broader ETFs, or (3) as the basic building blocks of a long term portfolio.
• The argument for using sector ETFs as the basic building blocks of a portfolio is that doing so makes your portfolio more granular, providing more rebalancing opportunities.
• Sector ETFs are attractive to short term traders and momentum investors, as there are dramatic differences in the performance of US sectors in most years.
• Sector ETFs are good for hedging. Hedge funds can use them to hedge long positions concentrated in a particular sector, and sophisticated individuals can use them to hedge job exposure.

What to Look Out For

• Compared to broader index ETFs, sector ETFs tend to have higher expense ratios and wider buy-sell spreads (which makes them more costly to purchase and sell).
• Market-cap weighted sector ETFs tend to be dominated by large cap stocks, so they don't provide much exposure to small cap stocks. The dominance of large cap stocks also leads to concentration, making them generally more volatile than broader index ETFs.
• If you're using sector ETFs as the basic building blocks of a long term portfolio, don't mix families. For that reason the sector ETFs are grouped together on this page by index family.
• Avoid Merrill Lynch HOLDRs: they're fixed baskets of stocks that become less and less representative of their sectors over time. Internet HOLDRs, for example, doesn't include Google.

Further Reading

• The primary benefit of using granular (as opposed to broad) ETFs as the basic building blocks of a long-term portfolio is the rebalancing opportunity they provide. For more on rebalancing, see How to Make Money By Rebalancing and Rebalancing Rules. For an alternative view, see Vanguard's Jack Bogle on Rebalancing: Don't!.
• For more on using sector ETFs to hedge job exposure, see the comments in Was Peter Lynch Really Right?.
• Types of sector ETFs: Global Sector ETFs, Foreign Sector ETFs, Primary US Sector ETFs, Quant Strategy Sector ETFs, Fundamental Sector ETFs and Leveraged Sector ETFs.

This page is part of The Seeking Alpha ETF Selector which sorts ETFs by type, highlights how to use them and what to look out for, and provides links to articles that discuss key issues for investors.

Comments

[DavidJackson]

Have we missed out any ETFs here? Or any Seeking Alpha articles that are important to understanding them? If so, please leave a comment and let us know!

[RogerNusbaum]

Hi all, I think the Rydex Equal Weight, Wisdom Tree Foreign, iShares S&P Global all offer something unique to the groups above. The PowerShares sector funds, while mostly a slightly different mix of the same names also might have a seat at this table?

[DavidJackson]

Hi Roger,

Totally agree -- they certainly deserve a seat at the table. We've broken the sector ETFs into the following groups because there are so many of them:

Global Sector ETFs
etf.seekingalpha.com/a...

Foreign Sector ETFs
etf.seekingalpha.com/a...

Primary US Sector ETFs
etf.seekingalpha.com/a...

Leveraged Sector ETFs
etf.seekingalpha.com/a...

And we're going to group them into individual sectors as well.

Let me know your thoughts on the format we're using.
Best,
David

[Russ Abbott]

There don't seem to be any transportation ETFs listed. Is that because there simply aren't any?

[DavidJackson]

Russ, thanks for catching this -- for some reason we'd omitted the Dow Jones Transportation Average Index Fund ETF (IYT). We've added it in now.

[JSeabold]

What about iShares DJ US Tech (IYW)?