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Investment Profile

Investment Profile: Retail Therapy

  • Retail and retail spending is one of the largest segments of the economy
  • Invest in many of your favorite retailers, as well as lesser-known names
  • Retail Therapy follows a broad index of top retailers Including Costco and Walmart
2 min read

Americans love to shop.

In fact, retail spending is one of the largest segments of the economy, generating $5 trillion in sales in 2017, according to the U.S. Census Bureau. That’s equal to roughly one-quarter of everything the economy produces.

And the retail industry has undergone huge changes in the past few decades. There are bricks and mortar stores that millions of people frequent on a daily basis–like Best Buy, Costco, Home Depot, J.C. Penney, Target, and Walmart–are still found all across America.

But newcomers, such online retailers such as Amazon and Jet.com have also altered the industry with shopping and home delivery that are as easy as clicking a button. Ecommerce drove nearly half the growth of the entire retail industry, as of 2017.

If the thought of all that money ringing through cash registers and electronic shopping carts sounds compelling, you may want to check out Retail Therapy.

What’s in the fund?

Retail Therapy is Stash’s name for the SPDR® S&P® Retail ETF, from investment company State Street Global Advisors (Ticker: XRT).

The fund invests in 85 companies, as of May 17, 2018, and it follows the S&P Retail Select Industry Index. It casts a wide net for categories, with stock holdings in apparel, automotive, computer and electronics, drugstores, food, e-commerce, and general merchandise stores, according to the fund prospectus.  

While the stocks it holds are names you’re likely to be familiar with, including Amazon, Costco, and Walmart, there are plenty of next-tier retailers, such as American Eagle Outfitters, Burlington, and Dick’s Sporting Goods. There are also some companies you might not associate with the retail sector, such as Netflix and TripAdvisor.   

Performance

Retail Therapy had a year-to-date return of 3.23% as of May 18, according to Morningstar, and a one-year return of 15.43%. It also had a 3-year return of -0.91%.

Similar funds, such as Invesco Powershares Dynamic Retail ETF (PMR) has a year-to-date return of 1%, according to Morningstar, as of May 18, and a 3-year return of -0.70%. Its one-year return is 8.62%.

Risks

Retail Therapy is a sector-specific fund, meaning that it invests in a particular industry. Investing in a specific sector carries more risk than investing in a fund with a broader set of holdings. That’s because it can be affected by factors concentrated in that industry–such as supply chain or economic events.

Another risk to consider: The fund relies on something called consumer discretionary spending. That’s money consumers have left over to spend on things they want, but don’t necessarily need. When times are tough, and people have less money to spend, the retail sector could suffer.

Expenses

The fund has an expense ratio of 0.35%. The industry average for ETFs is 0.23%, according to industry data.

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By Jeremy Quittner
Jeremy Quittner is the senior writer for Stash.

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This material has been distributed for informational and educational purposes only, represents an assessment of the market environment as of the date of publication, is subject to change without notice, and is not intended as investment, legal, accounting, or tax advice or opinion. Stash assumes no obligation to provide notifications of changes in any factors that could affect the information provided. This information should not be relied upon by the reader as research or investment advice regarding any issuer or security in particular. The strategies discussed are strictly for illustrative and educational purposes and should not be construed as a recommendation to purchase or sell, or an offer to sell or a solicitation of an offer to buy any security. There is no guarantee that any strategies discussed will be effective.

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