To get a better handle on market exposure, investors can utilize sector-specific ETFs as a way to overweight specific areas of equities market and better manage investment portfolio exposures.
Dan Dolan, Director of Wealth Management Strategies for Sector SPDRs, at the Charles Schwab Impact Conference argued that there are two main applications to sector-specific ETFs: people use them as a stock substitute and advisors can build model portfolios through sector allocations.
Investors who would usually pick one or two sector stocks can now diversify their position with exposure to hundreds of companies through a single sector ETF. For example, the Technology Select Sector SPDR Fund (NYSEArca: XLK) is a popular way to access the technology segment of the market as it provides exposure to information technology companies found in the S&P 500, such as Apple, Facebook, Google and Microsoft, among others.
Additionally, financial advisors have also begun to utilize sector ETFs to customize portfolios to meet a particular object, such as income, growth or something in between, Dolan said.