The SPDR Innovative Technology ETF Can Run Higher

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This article is a part of InvestorPlace.com’s Best ETFs for 2020 contest. Bret Kenwell’s choice for the contest is the SPDR Innovative Technology Fund (NYSEARCA:XITK).



an image that says 10 best ETFs of 2020


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an image that says 10 best ETFs of 2020

It was another solid quarter for the FactSet Innovative Technology SPDR ETF (NYSEARCA:XITK), even though both it and the Nasdaq fell quite a bit from the quarterly highs. Still, the XITK ETF tacked on a 16.1% gain in the third quarter versus a gain of “just” 11% for the index. 

Given that the exchange-traded fund surged more than 47% in the second quarter, last quarter’s gains were impressive. Again that handedly outperformed the Nasdaq, which rallied 30.6% in Q2. 

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Some investors look at the XITK ETF and say, “No, that’s way too risky. I’ll stick with the index.” 

To me it seems risky to have that kind of attitude toward the ETF, particularly one that continues to perform so well. Let’s look at this name more closely. 

A Deeper Look at the XITK ETF

I like to know how a stock has done on the downside, as well as the upside. For instance, investors could have been long some bullish ETFs with two- or three-times leverage. I am talking about leverage within the fund, not with one’s own account. 

In any regard, a 100% rally in a levered ETF vs. a 50% gain in the index does little good to me if it first fell 50% vs. a 25% dip in the index. Granted, it’s a bit more complex than that, but the point still stands. We have to consider performance in both directions. 

For the XITK ETF, it’s up 52.2% this year and 75.8%