ETFs offer all kinds of benefits, from tax efficiency to transparency, but perhaps their greatest benefit stems from their ability to serve as building blocks. Sector ETFs, for example, can help investors create an equity allocation that matches their own investment theses about certain sectors. One could heavily lean into tech to get the most out of that key sector while adding steady utility names in a utilities ETF. The key, however, is to rebalance those sectors when the market shifts or, for example, a new year arrives.
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Fidelity Investments offers a suite of sector ETFs, with several of their numbers up more than 25% this year. The Fidelity MSCI Information Technology Index ETF (FTEC ), charging just eight basis points, has returned 35.7% over the last one-year period, per Fidelity Investments data, on a NAV basis. YTD, the fund has returned 34%, per ETF Database data. That has, intriguingly, beaten its ETF Database Category and FactSet Segment averages.
Sector ETFs in 2025
FTEC joins other sector ETFs from Fidelity Investments like, for example, the Fidelity MSCI Utilities Index ETF (FUTY ) and the Fidelity MSCI Communication Services Index ETF (FCOM ), in performing well this past year. So why should investors be looking to rebalance right now?
A new year brings new opportunities, storylines, and portfolio needs. Returning to FTEC, which offers exposure to a key segment in tech, can illustrate the case for rebalancing. Investors may want to either add or decrease their exposure, for example, depending on tech earnings early in the new year. At the same time, should deregulation benefit AI investing or the supply chains behind AI development, or should sector ETFs like FTEC offer the flexibility to add exposure?
Together, sector ETFs can offer useful allocation tools but, as with any tool, require fine-tuning. FCOM, FUTY, and FTEC have all performed well this year and could be poised to start 2025 strong, as well.
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Fidelity Investments® is an independent company unaffiliated with VettaFi LLC (“VettaFi”). These articles do not form any kind of legal partnership, agency affiliation, or similar relationship between VettaFi and Fidelity Investments, nor is such a relationship created or implied by the articles herein. VettaFi LLC is the author and owner of these articles.
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