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Definition of the Week: Sector ETF

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Sector ETF

What is a sector ETF? A sector ETF is a class of exchange-traded funds that focuses solely on investing in stocks and securities from a specific sector or industry. A sector ETF allows the average investor to own shares in multiple companies in one sector without needing a huge amount of money to buy the stocks individually.

Stockbrokers.com Explains Sector ETFs:

The sector ETF is absolutely one of the most popular classes of exchange-traded funds. Liquidity in these ETFs are tremendous, so investors are able to get in and out precisely when they wish. Leveraged sector ETFs are becoming popular of late as well. Leveraged sector ETFs aim to double the return of the underlying index they are tracking. The sector ETF is often used as a method of hedging inside a portfolio. Like most ETFs, a sector ETF can be very helpful in keeping a portfolio diversified.

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