Sector ETF

AAA

DEFINITION of 'Sector ETF'

A class of exchange-traded fund that invests in the stocks and securities of a specific sector, typically identified in the fund title. Most sector ETFs focus on U.S.-based stocks, but several will invest globally in an attempt to capture the worldwide performance of the given sector. Assets will be passively managed around an underlying index; several use indexes provided from data services like S&P and Dow Jones. Leveraged sector ETFs are also available, which aim to achieve double the return of the underling index, both on advancing and declining trading days.

INVESTOPEDIA EXPLAINS 'Sector ETF'

Sector ETFs have become very popular among investors, as they can be used to plug holes in otherwise diversified portfolios, or simply for hedging and speculating. Their high level of liquidity means that there are rarely any large tracking errors from the underlying index, even during intraday trading.

VIDEO

RELATED TERMS
  1. Business Cycle

    The fluctuations in economic activity that an economy experiences ...
  2. Communication Industry ETF

    An exchange-traded fund that invests in telecommunications companies ...
  3. Auto Industry ETF

    An exchange-traded fund (ETF) that invests specifically in the ...
  4. Telecom ETF

    An exchange-traded fund that invests in companies with a significant ...
  5. Tracking Error

    A divergence between the price behavior of a position or a portfolio ...
  6. Sector

    1. An area of the economy in which businesses share the same ...
Related Articles
  1. Sector Rotation: The Essentials
    Fundamental Analysis

    Sector Rotation: The Essentials

  2. Consumer Spending As A Market Indicator
    Markets

    Consumer Spending As A Market Indicator

  3. 4 Steps To Building A Profitable Portfolio
    Mutual Funds & ETFs

    4 Steps To Building A Profitable Portfolio

  4. An Introduction To Pairs Trading With ...
    Mutual Funds & ETFs

    An Introduction To Pairs Trading With ...

comments powered by Disqus
Hot Definitions
  1. Last In, First Out - LIFO

    An asset-management and valuation method that assumes that assets produced or acquired last are the ones that are used, sold ...
  2. Ghosting

    An illegal practice whereby two or more market makers collectively attempt to influence and change the price of a stock. ...
  3. Elasticity

    A measure of a variable's sensitivity to a change in another variable. In economics, elasticity refers the degree to which ...
  4. Tangible Common Equity - TCE

    A measure of a company's capital, which is used to evaluate a financial institution's ability to deal with potential losses. ...
  5. Yield To Maturity (YTM)

    The rate of return anticipated on a bond if held until the maturity date. YTM is considered a long-term bond yield expressed ...
  6. Net Present Value Of Growth Opportunities - NPVGO

    A calculation of the net present value of all future cash flows involved with an additional acquisition, or potential acquisition. ...
Trading Center