What XLK actually is

XLK follows the technology companies in the S&P 500. It is one of the Select Sector SPDR funds, which split the S&P 500 into 11 sectors.

What is inside

A few mega-cap companies, such as Apple, Microsoft and Nvidia, make up a large part of the fund, together with software, semiconductor and hardware firms. It is much more concentrated than the whole market.

Distributions

XLK pays a small quarterly dividend. Technology companies generally reinvest in growth or buy back shares, so income is low and the fund is meant mainly for growth.

What to keep in mind

  • Concentration. A few names move the fund.
  • Valuation risk. Tech can fall hard when sentiment changes.
  • Overlap. An S&P 500 fund already holds these companies.

Quick take

XLK is a concentrated bet on US technology for growth, not for dividends.