Magnificent 7 & Communications ETF: A Strategic Blend Beyond QQQ This ETF combines the robust market exposure of the Magnificent Seven stocks with leading communications companies, offering investors a comprehensive diversification strategy beyond tradit

Communication Services ETF Surges ahead, Challenging Tech’s Dominance

New York, NY – september 10, 2025 – While the Technology sector has long been a favorite among investors, a compelling choice is gaining significant traction: the Communication services sector. Recent data indicates that funds tracking this sector are delivering robust returns, attracting considerable institutional investment, and offering a more diversified portfolio approach than traditional tech-focused Exchange Traded Funds (ETFs).

A Shift in Sector Performance

Since a significant rebalancing of the S&P 500 in September 2018, prominent companies previously categorized within the technology sector – including major players like Meta, Apple, and netflix – transitioned into the Communication Services sector. This reshuffling has yielded remarkable results. Over the last six years, the Communication Services sector has consistently ranked among the top three performing sectors four times, experiencing substantial gains in 2019 (32.7%), 2020 (23.6%), 2021 (21.6%), 2023 (55.8%), and a leading 40.2% in 2024.

Despite a downturn in 2022, with a loss of 39.9% during the broader bear market, the sector has maintained an notable average annual return of 16.33% since the 2018 rebalancing. Currently, the Communications sector boasts a year-to-date (YTD) gain of 18.60% as of September 2025, surpassing all other sectors, including industrials at 14.81%.

The Rise of the XLC ETF

The State Street Corporation launched the Communication Services Select Sector SPDR Fund (XLC) in June 2018. Since then, it has appreciated by 127.41%, effectively outperforming the QQQ, which has seen a 91.69% increase over the same period. While the XLC manages a smaller asset base of $26.14 billion, it presents a compelling value proposition with a low expense ratio of 0.08% and a dividend yield of 0.92%, contrasted with the QQQ’s 0.20% and 0.49% respectively.

ETF	Expense Ratio	Dividend Yield	YTD Gain (Sept 2025)
QQQ	0.20%	0.49%	15.20%
XLC	0.08%	0.92%	18.60%

Diversification and Reduced Volatility

Although Meta Platforms represents a significant 18.81% weighting within the XLC, the overall portfolio construction exhibits greater diversification compared to the QQQ’s concentration in a few key holdings, like NVIDIA. This translates to reduced volatility, with the XLC’s implied volatility (IV) standing at 10.9 – its lowest point in the past 52 weeks. In contrast, the QQQ’s tech-centric approach results in a higher IV of 17.45%.

Did You Know? A lower implied volatility generally suggests a more stable investment.

furthermore, the XLC’s price-to-earnings (P/E) ratio of 19.40 appears reasonable within the current market context of high valuations, especially when compared to the QQQ’s P/E of 33.33, which is higher than both the NASDAQ (29.77) and S&P 500 (28.97).

Institutional Interest Signals Confidence

Analyzing short interest and institutional ownership provides valuable insights into market sentiment. as of August 15, 2025, the XLC has a short interest of 5.8 million shares, with an average daily trading volume of approximately 6.2 million shares, resulting in a days-to-cover ratio of around 1.0.This signifies a significant decline from July, when short interest was considerably higher (12-14 million shares), indicating a decrease in bearish bets against the communication services sector.

Pro Tip: A declining days-to-cover ratio frequently enough suggests growing confidence in an asset.

Over the past year, institutional investors have been net buyers of the XLC, with 836 buyers versus 551 sellers, representing inflows of $21.59 million against outflows of $2.77 billion. Notably, in the second quarter of 2025 alone, institutional investors purchased $19 billion worth of XLC shares while selling only $700 million. Analyst Consensus currently rates the XLC as a Moderate buy, with a majority of analysts (14 out of 18) recommending a Moderate Buy, and three issuing a Buy rating.

as investors navigate an evolving market, the Communication Services sector, and specifically the XLC ETF, presents a compelling case for diversification, growth potential, and relative stability.

Understanding Sector ETFs

Sector ETFs offer targeted exposure to specific industries within the broader market.They allow investors to capitalize on trends in particular sectors without having to individually select stocks. Understanding the dynamics of each sector, including its growth prospects and risk factors, is crucial for informed investment decisions. The Communication Services sector is evolving rapidly, driven by trends in media consumption, technology, and consumer behavior.

Frequently Asked Questions about communication Services ETFs

Q: What is a Communication Services ETF?

A: A Communication Services ETF is an exchange-traded fund that invests in companies within the communication services sector, including telecommunications, media, and entertainment.

Q: What are the benefits of investing in a Communication Services ETF?

A: These ETFs offer diversification, growth potential, and exposure to evolving consumer trends.

Q: How does the XLC ETF compare to the QQQ ETF?

A: The XLC ETF offers greater diversification and a lower expense ratio compared to the QQQ, while still providing exposure to major tech companies now classified within the communication services sector.

Q: What is implied volatility and why is it vital?

A: Implied volatility measures the market’s expectation of future price fluctuations.Lower implied volatility generally suggests a more stable investment.

Q: Is the Communication Services sector defensive?

A: Unlike the Technology sector, the communication Services sector has displayed more defensive characteristics during market downturns, offering a degree of stability during volatile periods.

What are your thoughts on the future of the Communication Services sector? Do you believe diversification is key to a triumphant investment strategy?

What are teh key differences in diversification between the QQQ ETF and a Splendid 7 & Communications ETF?

Magnificent 7 & Communications ETF: A Strategic Blend Beyond QQQ

The investment landscape is constantly evolving,and investors are continually seeking strategies to maximize returns while mitigating risk.While the QQQ ETF, tracking the Nasdaq-100, remains a popular choice for tech exposure, a new approach is gaining traction: combining the power of the “Magnificent Seven” stocks with the stability and growth potential of leading communications companies. This article explores the benefits of this strategic blend and how it differs from conventional tech-focused ETFs.

Understanding the Magnificent Seven

The “Magnificent Seven” – Apple (AAPL), Microsoft (MSFT), Alphabet (GOOGL/GOOG), Amazon (AMZN), Nvidia (NVDA), tesla (TSLA), and Meta Platforms (META) – have driven a notable portion of the S&P 500’s gains in recent years. These companies represent the forefront of innovation in their respective fields, boasting strong financials, dominant market positions, and consistent growth.

Apple (AAPL): Consumer electronics and software.

Microsoft (MSFT): Software, cloud computing, and gaming.

Alphabet (GOOGL/GOOG): Search, advertising, and cloud services.

Amazon (AMZN): E-commerce,cloud computing,and digital advertising.

nvidia (NVDA): Graphics processing units (GPUs) and artificial intelligence.

Tesla (TSLA): Electric vehicles and clean energy.

Meta Platforms (META): Social media and virtual reality.

Investing solely in these seven stocks, though, can concentrate portfolio risk. This is where the addition of a communications sector component becomes crucial.

The Role of Communications Companies

The communications sector, encompassing telecommunications, media, and entertainment companies, offers a different set of growth drivers and risk factors compared to the tech giants. Companies like Verizon (VZ), AT&T (T), Comcast (CMCSA), and Charter Communications (CHTR) provide essential services and generate stable cash flows.

here’s how communications companies complement the magnificent Seven:

1. Diversification: Reduces concentration risk associated with relying solely on seven stocks.
2. Dividend Income: Many communications companies offer attractive dividend yields, providing a steady income stream.
3. Defensive Characteristics: Demand for communication services tends to be relatively stable even during economic downturns.
4. 5G & Broadband Growth: Ongoing investments in 5G infrastructure and broadband expansion offer significant growth potential.

Magnificent 7 & communications ETFs: A Closer Look

several ETFs are emerging that specifically target this combined strategy. These ETFs typically allocate a significant portion of their holdings to the Magnificent Seven, while also including a diversified selection of communications stocks.

Key Considerations When Choosing an ETF:

Expense Ratio: Lower expense ratios translate to higher returns for investors.

Holdings: Review the ETF’s top holdings to ensure they align with your investment goals.

Tracking Error: Assess how closely the ETF tracks its underlying index.

Liquidity: Higher trading volume generally indicates greater liquidity.

Comparing to QQQ: Beyond Tech Concentration

The QQQ ETF provides broad exposure to the Nasdaq-100, which is heavily weighted towards technology companies.While QQQ offers growth potential, it lacks the diversification benefits of a Magnificent Seven & Communications ETF.

| Feature | QQQ ETF | Magnificent 7 & Communications ETF |

|—|—|—|

| Focus | Nasdaq-100 (primarily tech) | Magnificent Seven + Communications Sector |

| Diversification | Moderate (within tech) | Higher (across tech & communications) |

| Dividend yield | Typically Lower | Potentially Higher (due to communications stocks) |

| Risk Profile | Higher (tech-focused) | moderate (more balanced) |

Benefits of a Combined Strategy

Enhanced Risk-Adjusted Returns: Combining growth stocks with stable income-generating assets can improve overall portfolio performance.

* Reduced Volatility: Diversification across sectors can help