Should You Invest in the Financial Select Sector SPDR ETF (XLF)?

Zacks Equity Research
3 min read

In This Article:

  • The Financial Select Sector SPDR ETF (XLF) offers broad exposure to the Financials - Broad segment of the equity market with low costs and transparency.
  • With an expense ratio of 0.09%, XLF is one of the least expensive products in the space, making it an attractive option for investors.
  • The ETF has a 12-month trailing dividend yield of 1.41% and has added about 26.62% so far this year, outperforming the market.
  • XLF has a medium risk profile with a beta of 1.05 and standard deviation of 18.63% for the trailing three-year period.
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If you're interested in broad exposure to the Financials - Broad segment of the equity market, look no further than the Financial Select Sector SPDR ETF (XLF), a passively managed exchange traded fund launched on 12/16/1998.

An increasingly popular option among retail and institutional investors, passively managed ETFs offer low costs, transparency, flexibility, and tax efficiency; they are also excellent vehicles for long term investors.

Additionally, sector ETFs offer convenient ways 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 1, placing it in top 6%.

Index Details

The fund is sponsored by State Street Global Advisors. It has amassed assets over $44.73 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

Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.

Annual operating expenses for this ETF are 0.09%, making it one of the least expensive products in the space.

It has a 12-month trailing dividend yield of 1.41%.

Sector Exposure and Top Holdings

ETFs offer a diversified exposure and thus minimize single stock risk but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many 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 Cl B (BRK.B) accounts for about 13.35% of total assets, followed by Jpmorgan Chase + Co (JPM) and Visa Inc Class A Shares (V).

The top 10 holdings account for about 53.86% of total assets under management.

Performance and Risk

So far this year, XLF has added about 26.62%, and it's up approximately 49.31% in the last one year (as of 10/31/2024). During this past 52-week period, the fund has traded between $32.57 and $47.62.

The ETF has a beta of 1.05 and standard deviation of 18.63% for the trailing three-year period, making it a medium risk choice in the space. With about 74 holdings, it effectively diversifies company-specific risk.

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