Global Sector ETFs

Global Sector ETFs List
(click on symbol for data and articles)

iShares Global Sector ETFs
iShares S&P Global Materials Sector Index Fund (MXI)
iShares S&P Global Consumers Staples Sector Index Fund (KXI)
iShares S&P Global Consumer Discretionary Sector Index Fund (RXI)
iShares S&P Global Energy Sector Index Fund (IXC)
iShares S&P Global Financials Sector Index Fund (IXG)
iShares S&P Global Healthcare Sector Index Fund (IXJ)
iShares S&P Global Industrials Sector Index Fund (EXI)
iShares S&P Global Technology Sector Index Fund (IXN)
iShares S&P Global Utilities Sector Index Fund (JXI)
iShares S&P Global Telecommunications Sector Index Fund (IXP)

What Are They?

• Global Sector ETFs provide exposure to both US and non-US stocks by sector. They differ from foreign sector ETFs which cover only foreign stocks.
• These sector ETFs are generally market-cap weighted, meaning that larger companies have greater representation in the index, and if a stock's price rises fast, its weighting in the index rises.

Why & How To Use Them

• There are three ways to use sector ETFs: (1) for short term trading, (2) to overweight one or a couple of sectors in a long term portfolio by adding a single sector ETF to a portfolio of broader ETFs, or (3) as the basic building blocks of a long term portfolio.
• The argument for using global sector ETFs as the basic building blocks of a portfolio is that doing so makes your portfolio more granular, providing more rebalancing opportunities.
• Sector ETFs are attractive to short term traders and momentum investors, as there are dramatic differences in the performance of individual sectors in most years.

What to Look Out For

• Global sector ETFs provide varying degrees of exposure to currency movements, depending on the percentage of a sector accounted for by non-US stocks and the impact of currency movements on the constituent companies' earnings.
• Compared to broader index ETFs, sector ETFs tend to have higher expense ratios and wider buy-sell spreads (which makes them more costly to purchase and sell).
• Market-cap weighted sector ETFs tend to be dominated by large cap stocks, so they don't provide much exposure to small cap stocks. The dominance of large cap stocks also leads to concentration, making them generally more volatile than broader index ETFs.

Further Reading

• The primary benefit of using granular (as opposed to broad) ETFs as the basic building blocks of a long-term portfolio is the rebalancing opportunity they provide. For more on rebalancing, see How to Make Money By Rebalancing and Rebalancing Rules. For an alternative view, see Vanguard's Jack Bogle on Rebalancing: Don't!.
• Types of sector ETFs: Global Sector ETFs, Foreign Sector ETFs, Primary US Sector ETFs, Quant Strategy Sector ETFs, Fundamental Sector ETFs and Leveraged Sector ETFs.

This page is part of The Seeking Alpha ETF Selector which sorts ETFs by type, highlights how to use them and what to look out for, and provides links to articles that discuss key issues for investors.