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Should You Invest in the Financial Select Sector SPDR ETF (XLF)?
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Designed to provide broad exposure to the Financials - Broad segment of the equity market, the Financial Select Sector SPDR ETF (XLF - Free Report) is a passively managed exchange traded fund launched on 12/16/1998.
While an excellent vehicle for long term investors, passively managed ETFs are a popular choice among institutional and retail investors due to their low costs, transparency, flexibility, and tax efficiency.
Investor-friendly, sector ETFs provide many options to gain low risk and diversified exposure to a broad group of companies in particular sectors. Financials - Broad is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 5, placing it in top 31%.
Index Details
The fund is sponsored by State Street Global Advisors. It has amassed assets over $34.88 billion, making it the largest ETF attempting to match the performance of the Financials - Broad segment of the equity market. XLF seeks to match the performance of the Financial Select Sector Index before fees and expenses.
The Financial Select Sector Index seeks to provide an effective representation of the financial sector of the S&P 500 Index.
Costs
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive counterparts if all other fundamentals are the same.
Annual operating expenses for this ETF are 0.10%, making it one of the least expensive products in the space.
It has a 12-month trailing dividend yield of 1.87%.
Sector Exposure and Top Holdings
It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
This ETF has heaviest allocation in the Financials sector--about 100% of the portfolio.
Looking at individual holdings, Berkshire Hathaway Inc. Class B (BRK.B - Free Report) accounts for about 14.20% of total assets, followed by Jpmorgan Chase & Co. (JPM - Free Report) and Bank Of America Corp (BAC - Free Report) .
The top 10 holdings account for about 53.20% of total assets under management.
Performance and Risk
The ETF has lost about -13.25% so far this year and is down about -8.36% in the last one year (as of 05/18/2022). In that past 52-week period, it has traded between $33.05 and $41.42.
The ETF has a beta of 1.11 and standard deviation of 30.48% for the trailing three-year period, making it a medium risk choice in the space. With about 69 holdings, it effectively diversifies company-specific risk.
Alternatives
Financial Select Sector SPDR ETF holds a Zacks ETF Rank of 1 (Strong Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, XLF is an outstanding option for investors seeking exposure to the Financials ETFs segment of the market. There are other additional ETFs in the space that investors could consider as well.
IShares U.S. Financial Services ETF (IYG - Free Report) tracks Dow Jones U.S. Financial Services Index and the Vanguard Financials ETF (VFH - Free Report) tracks MSCI US Investable Market Financials 25/50 Index. IShares U.S. Financial Services ETF has $2.11 billion in assets, Vanguard Financials ETF has $9.74 billion. IYG has an expense ratio of 0.41% and VFH charges 0.10%.
Bottom Line
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.
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Should You Invest in the Financial Select Sector SPDR ETF (XLF)?
Designed to provide broad exposure to the Financials - Broad segment of the equity market, the Financial Select Sector SPDR ETF (XLF - Free Report) is a passively managed exchange traded fund launched on 12/16/1998.
While an excellent vehicle for long term investors, passively managed ETFs are a popular choice among institutional and retail investors due to their low costs, transparency, flexibility, and tax efficiency.
Investor-friendly, sector ETFs provide many options to gain low risk and diversified exposure to a broad group of companies in particular sectors. Financials - Broad is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 5, placing it in top 31%.
Index Details
The fund is sponsored by State Street Global Advisors. It has amassed assets over $34.88 billion, making it the largest ETF attempting to match the performance of the Financials - Broad segment of the equity market. XLF seeks to match the performance of the Financial Select Sector Index before fees and expenses.
The Financial Select Sector Index seeks to provide an effective representation of the financial sector of the S&P 500 Index.
Costs
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive counterparts if all other fundamentals are the same.
Annual operating expenses for this ETF are 0.10%, making it one of the least expensive products in the space.
It has a 12-month trailing dividend yield of 1.87%.
Sector Exposure and Top Holdings
It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
This ETF has heaviest allocation in the Financials sector--about 100% of the portfolio.
Looking at individual holdings, Berkshire Hathaway Inc. Class B (BRK.B - Free Report) accounts for about 14.20% of total assets, followed by Jpmorgan Chase & Co. (JPM - Free Report) and Bank Of America Corp (BAC - Free Report) .
The top 10 holdings account for about 53.20% of total assets under management.
Performance and Risk
The ETF has lost about -13.25% so far this year and is down about -8.36% in the last one year (as of 05/18/2022). In that past 52-week period, it has traded between $33.05 and $41.42.
The ETF has a beta of 1.11 and standard deviation of 30.48% for the trailing three-year period, making it a medium risk choice in the space. With about 69 holdings, it effectively diversifies company-specific risk.
Alternatives
Financial Select Sector SPDR ETF holds a Zacks ETF Rank of 1 (Strong Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, XLF is an outstanding option for investors seeking exposure to the Financials ETFs segment of the market. There are other additional ETFs in the space that investors could consider as well.
IShares U.S. Financial Services ETF (IYG - Free Report) tracks Dow Jones U.S. Financial Services Index and the Vanguard Financials ETF (VFH - Free Report) tracks MSCI US Investable Market Financials 25/50 Index. IShares U.S. Financial Services ETF has $2.11 billion in assets, Vanguard Financials ETF has $9.74 billion. IYG has an expense ratio of 0.41% and VFH charges 0.10%.
Bottom Line
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.