A family of exchange traded funds (ETFs) grew larger in 2007, money-wise.

Select Sector SPDRs’ assets climbed $8.87 billion, or 51.95%, reports the Centre Daily Times. In terms of sectors, the Select Sector SPDRs Financials (XLF) pulled in the most assets, $5.02 billion – that’s 122.94% growth.

Wait a minute. Isn’t the financial sector hurting? Then why are so many assets flowing into it?

One possible reason, according to the director of wealth management at Select Sector SPDRs in an appearance on CNBC, is that investors may simply see a basket of funds as less risky than an individual stock. Minimizing your direct exposure in some sectors, especially ones that are hurting, can in turn minimize portfolio risk.

Dolan cites the example of Merrill Lynch (MER) vs. XLF. Last year, Merrill Lynch lost 41.3%. Contrast that with XLF, which lost 19.2%. Yes – still a loss, but a significantly lower one. It’s another example of the benefits of ETFs and the instant diversification they provide.

Most of the other sector SPDRs ended the year in positive territory. The only one that lost assets was the Ultility SPDR (XLU), down 16.8%.

Tags: Energy, Financial, S&P 500, Sector ETFs, Utilities