How does the SKYY ETF work?

The world is becoming more digitalized every day, and as a result, the cloud computing industry is skyrocketing. For investors looking to tap into this burgeoning sector, the First Trust Cloud Computing ETF (SKYY) offers a viable opportunity. This article will break down how the SKYY ETF works, what it tracks, the benefits of investing in it, and important considerations before making an investment.

SKYY ETF: Overview

SKYY ETF aims to provide investors with targeted access to companies engaged in cloud computing. Established in 2011 by First Trust Advisors, this fund is one of the pioneering ETFs in the cloud computing niche. SKYY ETF offers a way to gain exposure to this rapidly growing industry by tracking the ISE Cloud Computing Index.

SKYY ETF: Underlying and Exposure: What Does It Track and How?

One of the essential things to understand about the SKYY ETF is its underlying index and the type of exposure it offers. The fund tracks the ISE Cloud Computing Index, which comprises companies involved in delivering network-based services, often known as cloud services. This includes companies in Software as a Service (SaaS), Platform as a Service (PaaS), and Infrastructure as a Service (IaaS) sectors. The fund aims to replicate the performance of this index by investing in the stocks that make up the index, holding them in proportion to their weight in the index.

SKYY overlap How does work the SKYY ETF?

SKYY ETF: Benefits of Investing

Investing in the SKYY ETF comes with several advantages. One of the most prominent benefits is diversified exposure to the cloud computing sector, which is among the fastest-growing in the tech industry. With companies like Amazon Web Services, Microsoft Azure, and Google Cloud making headlines, investing in cloud computing through SKYY ETF offers the potential for significant growth. Another benefit is the professional portfolio management by First Trust Advisors, which allows investors to invest in a carefully selected group of companies without needing extensive knowledge of the industry.

SKYY ETF: Considerations Before Investing

Before diving into the SKYY ETF, there are several factors to consider. First, the cloud computing industry can be volatile, and as such, SKYY may experience periods of high volatility. Investors need to be comfortable with this level of risk. Second, while the fund offers broad exposure to the industry, it does so at a relatively higher expense ratio compared to broader market ETFs. Lastly, it's essential to consider your investment horizon and financial goals to determine if the SKYY ETF aligns with your overall investment strategy.

Conclusion

The First Trust Cloud Computing ETF (SKYY) presents an enticing opportunity for those looking to invest in the fast-growing cloud computing industry. With its focus on tracking the ISE Cloud Computing Index, the SKYY ETF offers a way to diversify your investment in this sector. While there are several benefits, it's crucial to weigh the associated risks and costs before investing. For those who have a longer investment horizon and are comfortable with the level of risk involved, SKYY ETF offers a potentially lucrative investment opportunity in one of the most promising tech sectors.

Sources:
First Trust Cloud Computing ETF website
ISE Cloud Computing Index website
Various Financial News Outlets

SKYY ETF issuer
SKYY ETF official page

Get started