A type of an exchange traded fund (ETF), specifically an equity ETF, that is designed to track an index consisted of companies operating in the a specific sector in the economy. Such companies offer similar or related products or services within a given sector like energy (energy ETFs), technology (technology ETFs), utilities (utility EFTs), real estate (real estate ETFs), consumer staples (consumer staples ETFs), and so on.

Certain sector ETFs may specialize even further with a sector or focus only on companies that meet particular size ore revenue requirements. A subsector fund concentrates on a specific industry subgroup within a sector.

Investing in a sector ETF allows investors to have exposure to certain arrays of companies within the sector, rather than holding a single stock. Hence, the risks associated with holding a single stock might be reduced or mitigated.