What is Sector ETF?

Example

Here are some popular sector ETFs in Canada:

• Technology: TEC.TO (TD Global Technology Leaders)
• Energy: XEG.TO (iShares S&P/TSX Capped Energy)
• Financials: ZEB.TO (BMO Equal Weight Banks)
• Real Estate: ZRE.TO (BMO Equal Weight REITs)

For example, if you believe the Canadian energy sector will perform well, XEG.TO gives you exposure to companies like Canadian Natural Resources, Suncor, and Cenovus in a single purchase.

Why It Matters

Sector ETFs let you overweight a specific sector in your portfolio. But be careful: a portfolio too concentrated in one sector is risky. In 2020, the energy sector dropped over 30% while technology soared. For beginners, an all-in-one ETF like XEQT.TO is preferable.