Michael H
Often, what you leave out of your portfolio may be more important than what you put in. This applies to exchange-traded funds (ETFs), but also to funds that avoid certain segments based on investor demand and specific markets. Authorization. ESG funds do this, for example, by avoiding companies considered harmful to the environment.
For those concerned about fossil fuel exposure, funds that take this approach are SPDR® S&P 500 Fossil Fuel Reserve Free ETF (NYSE:SPYX). SPYX combines investment strategies with environmental awareness. By removing companies with fossil fuel reserves from the popular S&P 500 Index (SP500), SPYX enables investors to support a greener future without sacrificing exposure to U.S. large-cap stocks.
SPYX was launched on November 30, 2015 and is sponsored by State Street Global Advisors, a major asset management firm. ETF With a total expense ratio of 0.20%, this is a cost-effective option for investors looking to balance financial goals with environmental values.
ETF holdings overview
Because this is essentially the S&P 500 without the fossil fuel-related companies, the holdings will be higher to fill the industry space that the S&P 500 itself would otherwise hold.
ssga.com
In terms of industry composition, SPYX’s investment portfolio is dominated by the information technology industry, accounting for nearly 30.5% of total holdings (higher than the 29% of the S&P 500 Index). Other important industries include finance (13.53%) and healthcare (12.59%). Basically, it’s an S&P 500 index with a slightly higher weighting in technology stocks and a slightly lower weighting in energy stocks.
ssga.com
How SPYX compares to similar ETFs
Compared to similar ETFs, SPYX stands out for its unique investment strategy. While other ETFs tracking the S&P 500 include companies with fossil fuel reserves, SPYX intentionally excludes such companies. This approach aligns the fund with the growing trend of sustainability-focused investing, potentially making it an attractive option for environmentally conscious investors.
But the real question is whether that’s enough for investors. When we compare SPYX to the S&P 500 itself, it looks like SPYX may resume its relative downtrend. That makes sense given the weak tech sector and the recently resurgent energy performance. For those who are against fossil fuels, I know it doesn’t matter to them. But if the energy industry is showing some real momentum right now, this may not be the best return solution.
StockCharts.com
Advantages and Disadvantages of Investing in SPYX
One of the main advantages of investing in SPYX is that it adheres to the principles of sustainable investing. For investors looking to support the transition to a low-carbon economy, SPYX offers an opportunity to do so without abandoning exposure to U.S. large-cap stocks.
However, SPYX’s approach is not without potential shortcomings. The fund’s exclusion of companies with fossil fuel reserves could limit exposure to certain industries, potentially hurting its performance during periods when those industries outperform the market. Additionally, the Fund’s concentration in the technology sector may make it more susceptible to industry-specific risks.
Conclusion: To invest or not to invest in SPYX?
Investing in SPYX is for those seeking to combine investment strategies with environmental values. Frankly, though, there’s probably better funding on the ESG side to help with that because fossil fuels aren’t the only things that have a negative impact on the environment. I also don’t believe this fund will outperform a core equity portfolio that’s more balanced across all industries, given that the energy sector already represents a relatively small portion of most major market averages. If anything, the SPDR S&P 500 Fossil Fuel Reserve Free ETF may be riskier because of its greater weighting in the technology sector. Because of this, SPYX is a pass for me.
