Investment Education

Launched on 12/16/1998, the Energy Select Sector SPDR ETF (XLE) is a passively managed exchange traded fund designed to provide a broad exposure to the Energy - Broad segment of the equity market.

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.

Investor-friendly, sector ETFs provide many options to gain low risk and diversified exposure to a broad group of companies in particular sectors. Energy - Broad is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 15, placing it in bottom 6%.

Index Details

The fund is sponsored by State Street Global Advisors. It has amassed assets over $38.06 billion, making it the largest ETF attempting to match the performance of the Energy - Broad segment of the equity market. XLE seeks to match the performance of the Energy Select Sector Index before fees and expenses.

The Energy Select Sector Index includes companies from the following industries: oil, gas & consumable fuels and energy equipment & services.

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 3.12%.

Sector Exposure and Top Holdings

While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

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

Looking at individual holdings, Exxon Mobil Corp (XOM) accounts for about 23.19% of total assets, followed by Chevron Corp (CVX) and Conocophillips (COP).

The top 10 holdings account for about 75.03% of total assets under management.

Performance and Risk

Year-to-date, the Energy Select Sector SPDR ETF has added roughly 16.54% so far, and is up about 17.24% over the last 12 months (as of 12/02/2024). XLE has traded between $79.91 and $98.08 in this past 52-week period.

The ETF has a beta of 1.20 and standard deviation of 26.27% for the trailing three-year period, making it a high risk choice in the space. With about 25 holdings, it has more concentrated exposure than peers.

Alternatives

Energy Select Sector SPDR ETF holds a Zacks ETF Rank of 2 (Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, XLE is an excellent option for investors seeking exposure to the Energy ETFs segment of the market. There are other additional ETFs in the space that investors could consider as well.