Sector ETF

Loading the player...

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.

BREAKING DOWN '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.

RELATED TERMS
  1. ETF Of ETFs

    An exchange-traded fund (ETF) that tracks other ETFs rather than ...
  2. Index ETF

    Exchange-traded funds that follow a specific benchmark index ...
  3. Exchange-Traded Fund (ETF)

    A security that tracks an index, a commodity or a basket of assets ...
  4. Services Sector ETF

    Exchange-traded funds (ETFs) that invest in either the consumer ...
  5. Sector Rotation

    The action of a mutual fund or portfolio manager shifting investment ...
  6. Passive ETF

    One of two types of exchange-traded funds (ETFs) available for ...
Related Articles
  1. ETFs & Mutual Funds

    Spread Out Risk With Sector-Based ETFs

    These ETFs take the sector rotation strategy from institutional investors and puts it in your hands.
  2. ETFs & Mutual Funds

    An Introduction To Sector ETFs

    Find out how these specialized ETFs can give your portfolio the punch it needs.
  3. ETFs & Mutual Funds

    How to Choose the Right Sector Funds

    Adding sector funds to your portfolio can pay off but it's important to make sure you're choosing the right market niche.
  4. ETFs & Mutual Funds

    Exchange-Traded Funds: Conclusion

    Although the first exchange-traded funds (ETFs) were designed to track broad market stock indexes, since that time, ETFs have been developed to track industrial sectors, investment styles, fixed ...
  5. ETFs & Mutual Funds

    How to Day Trade Sector ETFs Every Day

    Sector ETFs provide a liquid asset that day traders can trade each and every day. Here's how to find which sector ETFs to day trade and what to watch for.
  6. ETFs & Mutual Funds

    ETFs For Sector Rotation Strategies

    Find out how exchange-traded funds can take the bumps out of your investing style.
  7. ETFs & Mutual Funds

    Financial Funds Provide Diversity ... And Risk

    Sector funds can provide maximum exposure to financial industry stocks, but this benefit is a double-edged sword.
  8. ETFs & Mutual Funds

    An Introduction To Pairs Trading With ETFs

    This strategy can help investors reduce portfolio volatility and make money in uncertain markets.
  9. ETFs & Mutual Funds

    An Introduction To Sector Mutual Funds

    Investing among several different sectors in the economy is a way to diversify your portfolio.
  10. ETFs & Mutual Funds

    Exchange-Traded Funds: Equity ETFs

    The first ETF was developed to create diversified portfolios based on equity indexes. Because equities are a core asset class for investment portfolios, it is important for investors to understand ...
RELATED FAQS
  1. What are the main benchmarks that track the performance of the financial services ...

    Learn about some of the primary benchmarks utilized by investors and analysts to track the performance of the financial services ... Read Answer >>
  2. Are there ETFs that track the drugs sector?

    Find out whether pharmaceutical exchange traded funds (ETFs) are available for investment. Learn more about how ETFs track ... Read Answer >>
  3. What exactly is an ETF portfolio?

    Learn what exchange-traded funds (ETFs) are and their advantages to investors, what a portfolio of ETFs is, and discover ... Read Answer >>
  4. What are some popular ETFs that track the industrial sector?

    Learn about some of the most popular ETFs that track the industrials sector. Understand what factors may lead to the increase ... Read Answer >>
  5. Should I invest in ETFs or index funds?

    Learn advantages to investing in exchange-traded funds, or ETFs, and index funds, and decide whether to include them in your ... Read Answer >>
  6. Who's in charge of managing exchange-traded funds?

    An exchange-traded fund (ETF) is a security that tracks an index but has the flexibility of trading like a stock. Just like ... Read Answer >>
Hot Definitions
  1. Glass-Steagall Act

    An act the U.S. Congress passed in 1933 as the Banking Act, which prohibited commercial banks from participating in the investment ...
  2. Quantitative Trading

    Trading strategies based on quantitative analysis which rely on mathematical computations and number crunching to identify ...
  3. Bond Ladder

    A portfolio of fixed-income securities in which each security has a significantly different maturity date. The purpose of ...
  4. Duration

    A measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. ...
  5. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  6. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
Trading Center