On average, the top ten holdings make up 55% of the market value between the nine sector ETFs.
In comparison, the top ten holdings in the broader SPDR S&P 500 ETF (NYSEArca: SPY) only makes up 17.7% of the portfolio.
While there is nothing wrong with overweighting specific areas of the market with sector-related ETFs, investors should understand what makes up the ETFs and the greater volatility associated with the more focused investment strategies – the S&P 500 range revealed an average range of 34% between the top and bottom performing sectors since 2004. [What Are US Stock Prices Telling Us About 2015?]
For more information on market sectors, visit our sector ETFs category.
Max Chen contributed to this article.