State Street ETF Update: Why I Cut Three Funds and Doubled Down on My Winners

My income portfolio has long been concentrated in technology.

Funds like QQQI, SPYI, CHPY, and FEP have been tremendous income producers, but they all tend to move together whenever sentiment toward AI or semiconductors changes.

I wanted to build a defensive layer that generated income from sectors completely outside of technology.

To test that idea, I initially invested in five State Street sector income ETFs covering:

• Energy

• Utilities

• Industrials

• Materials

• Healthcare

After several months of tracking both distributions and price performance, the results became clear.

The purpose of a test isn't to prove yourself right.

It's to collect data and let the results guide your decisions.

Some sectors simply failed to justify keeping my capital invested.

Industrials remained trapped in tariff uncertainty.

Materials struggled to gain momentum.

Healthcare never developed a meaningful catalyst during the testing period.

None of these were necessarily bad funds—they just didn't fit what I wanted my portfolio to accomplish.

Every dollar in my portfolio has a job.

Some of these dollars simply weren't doing theirs.

So I reallocated that capital into areas where I have much stronger conviction.

XLEI: My Highest Conviction Position

Energy has become my largest State Street position.

I currently own just over 1,000 shares, representing roughly $28,000 invested.

Ironically, shortly after I significantly increased my position, geopolitical tensions eased and energy prices pulled back.

As of this update, the position is down roughly 3%.

That doesn't bother me.

I'm not buying XLEI because I expect it to outperform over the next month.

I'm buying it because I expect it to serve my portfolio over the next several years.

When technology stocks struggle, energy often behaves very differently.

That's exactly the diversification I want.

This position serves as a long-term hedge against the concentration risk created by my technology-heavy income portfolio.

Even while the share price has declined, the ETF continues generating approximately a 20% annualized yield.

The distributions alone have already produced roughly $250 in income, steadily helping offset the temporary decline in capital value.

This is why I continue adding to the position through dollar-cost averaging.

XLUI: Utilities Continue Serving Their Purpose

Utilities have been a more complicated story.

Initially, this was my largest position within the State Street group.

After disappointing early performance, I decided to reduce my exposure.

That decision locked in approximately $500 in realized losses, but it also lowered my overall cost basis.

Today, the remaining shares have recovered and are now showing a modest unrealized gain.

Combined with more than $120 in distributions, the position continues doing exactly what I intended.

Utilities aren't exciting.

They aren't supposed to be.

People continue using electricity, water, and essential services regardless of economic conditions.

That's exactly why utilities belong in my defensive allocation.

XLSI: Stability Over Excitement

Consumer Staples became my newest addition after exiting the weaker-performing sectors.

This ETF owns companies people rely on every day.

Businesses like:

• Procter & Gamble

• Coca-Cola

• Costco

• Walmart

Whether the economy is booming or struggling, consumers continue buying groceries, household products, and everyday necessities.

The current yield is lower than my energy position—roughly 10% to 11%—but that's perfectly acceptable.

I'm not buying consumer staples for aggressive income.

I'm buying them for stability.

Sometimes boring investments perform the most important job in a portfolio.

Instead of spreading capital across five sectors, I've narrowed my defensive allocation to three areas where I have the strongest conviction:

• Energy

• Utilities

• Consumer Staples

Together, these positions represent roughly $45,000, or about 5% of my total portfolio.

This isn't diversification for diversification's sake.

Each sector serves a distinct purpose:

• Energy helps offset technology concentration.

• Utilities provide defensive stability.

• Consumer Staples generate reliable income through nearly every economic cycle.

Since launching the experiment, these positions have already generated over $365 in distributions, even while portions of the market remained volatile.

That reinforces exactly why I built this defensive layer in the first place.

I have no intention of making large, one-time purchases.

Instead, I'm continuing to dollar-cost average into these positions gradually.

This isn't something I'm trying to build overnight.

It's a long-term project.

My aggressive income portfolio will continue doing the heavy lifting through technology-focused funds.

These defensive positions simply provide another source of income that isn't dependent on AI, semiconductors, or the next earnings report from Nvidia.

Looking ahead, I'm still interested in adding healthcare exposure through XLVI, but only when the timing makes sense.

Healthcare remains an area I believe belongs in a diversified income portfolio.

I'm simply waiting for the right opportunity.

This experiment reminded me of something every investor eventually learns.

Successful investing isn't about proving your original thesis.

It's about being willing to adjust when the data tells a different story.

I tested five funds.

Three didn't earn a permanent place in my portfolio.

The remaining three did.

That's exactly how investing should work.

Every position should have a clear purpose.

For me, these ETFs aren't designed to outperform technology during bull markets.

They're designed to keep my income snowball rolling when technology eventually slows down.

And that's a role worth paying for.