ETF Update: SPDR History, Investment Strategy, Hard-Hit ETFs

SPDR History
Throughout all the releases of new ETFs, a core group of nine ETFs that has been around since 1998 is the Select Sector SPDRs. These ETFs track the different sectors of the S&P 500.

Originally, Merrill Lynch sponsored the SPDRs ETFs, but today it is considered the index agent for the ETFs. This means that whenever there is a change to the ETFs, Merrill Lynch decides in which sector the new stocks belong, explains David Hoffman for Investment News.

Currently, State Street Global Advisors manages the SPDRs ETFs that have collected more than $20 billion in assets. With State Street Global Advisors managing the ETFs and ALPS distributing them, a separate, independent board of directors makes decisions regarding the operations of the Select Sector SPDRs, explains Daniel P. Dolan of ALPS Distributors, as reported in the article. Having the independent board of directors has also helped lower expenses for the Select Sector SPDRs, but in general, ETF expenses have crept up, he says.

The nine Select Sector SPDRs ETFs and their performance year-to-date include:

Consumer Discretionary Select Sector SPDR (XLY) - down 4.4%

Consumer Staples Select Sector SPDR (XLP) - down 4.5%

Energy Select Sector SPDR (XLE) - up 17.4%

Financial Select Sector SPDR (XLF) - down 6.2%

Health Care Select Sector SPDR (XLV) - up 3.5%

Industrials Select Sector SPDR (XLI) - up 12.2%

Materials Select Sector SPDR (XLB) - up 12.8%

Technology Select Sector SPDR (XLK) - up 10.2%

Utilities Select Sector SPDR (XLU) - up 6.4%

Investment Strategy
When investing in ETFs or other investment vehicles, we can't stress enough how important it is to create an investment strategy. An investment strategy helps investors stay on target for their individual financial goals. It also helps protect investors from making emotional, and sometimes irrational decisions during volatile markets.

Another benefit is that it helps investors make decisions, re-allocate funds and analyze their investments' performance, says Ryan Barnes for Investopedia. He reminds investors to ask themselves when creating their investment strategies: How will I judge the effectiveness of my holding and whether my assumptions are right or wrong?

Perhaps an even more important question to add to Barnes' suggestion is: What are my stop-loss points?

Hard-Hit ETFs
The markets and ETFs are damaged from subprime and credit storms this summer, but ETFs seem to have withstood the disasters better than most. Broad-based ETFs, such as SPDRs (SPY), remained relatively flat while some hedge funds, for example, lost billions.

However, there were a few sector-specific ETFs that were severely hit, such as iShares FTSE NAREIT Mortgage REITs (REM). It invests in firms that specialize in lending for mortgages. Launching May 4, it lost 38% through Aug. 24, according to Will McClatchy for ETFZone.com Because they tend to be highly diversified, many of the ETFs that were hit have been rebounding. Several ETFs had holdings in sinking stocks such as Countrywide (CFC), but mostly in small amounts.