Investment Education

If you're interested in broad exposure to the Materials - Broad segment of the equity market, look no further than the Materials Select Sector SPDR ETF (XLB), a passively managed exchange traded fund launched on 12/16/1998.

Retail and institutional investors increasingly turn to passively managed ETFs because they offer low costs, transparency, flexibility, and tax efficiency; these kind of funds 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. Materials - Broad is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 14, placing it in bottom 13%.

Index Details

The fund is sponsored by State Street Global Advisors. It has amassed assets over $5.98 billion, making it one of the largest ETFs attempting to match the performance of the Materials - Broad segment of the equity market. XLB seeks to match the performance of the Materials Select Sector Index before fees and expenses.

The Materials Select Sector Index seeks to provide an effective representation of the materials sector of the S&P 500 Index.

Costs

Expense ratios are an important factor in the return of an ETF and in the long term, cheaper funds can significantly outperform their more expensive counterparts, other things remaining the same.

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 1.86%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation in the Materials sector--about 100% of the portfolio.

Looking at individual holdings, Linde Plc (LIN) accounts for about 17.39% of total assets, followed by Sherwin Williams Co/the (SHW) and Air Products + Chemicals Inc (APD).

The top 10 holdings account for about 60.58% of total assets under management.

Performance and Risk

So far this year, XLB has added roughly 12.17%, and is up about 18.31% in the last one year (as of 12/02/2024). During this past 52-week period, the fund has traded between $80.98 and $97.63.

The ETF has a beta of 1.07 and standard deviation of 19.09% for the trailing three-year period, making it a medium risk choice in the space. With about 31 holdings, it has more concentrated exposure than peers.