Learn more about every Sector ETF that we are following

Materials Select Sector SPDR Fund (XLB)
*MSCI ESG Fund Rating of A based on a score of 6.03 out of 10

Materials Select Sector SPDR Fund (XLB) is a massive, liquid ETF that invests in basic materials companies from the S&P 500. Its limited selection universe means it is heavily concentrated, with just a few holdings making up a huge chunk of the portfolio. Not surprisingly, XLB favors large-caps relative to our broader benchmark. Still, it offers reasonable exposure to the space. XLB is one of the most popular funds in the US materials segment, with a huge asset base and unmatched trading volume. It’s an excellent choice for occasional traders and institutions alike.

Industrial Select Sector SPDR Fund (XLI)
* MSCI ESG Fund Rating of A based on a score of 6.28 out of 10

Industrial Select Sector SPDR Fund (XLI) provides investors with broad US industrial exposure that’s cheap to hold and extremely easy to trade. The fund selects from the S&P 500, limiting its small- and midcap exposure and producing a more concentrated portfolio. Because smaller firms make up only a fraction of the industrial sector, the effects of the exclusion are mild. The fund’s top holdings, performance, and overall riskiness remain essentially in line with our benchmark. XLI meets the needs of both traders and buy-and-hold investors with impressive assets, excellent trading volume and a low expense ratio.

Health Care Select Sector SPDR Fund (XLV)
*MSCI ESG Fund Rating of BBB based on a score of 5.43 out of 10.

Health Care Select Sector SPDR Fund (XLV) dominates the US health care segment on practically every measure. Not only is XLV the oldest and largest fund in the segment, its trading volume dwarfs its closest competitors making XLV’s liquidity unparalleled in the segment. It is also relatively cheap amongst peers. The fund tracks its index well, so real-world costs are roughly in line with the headline fee. Since XLV is both cap weighted and fishes only from the S&P 500, it tilts heavily toward mega-caps. The holdings are also more concentrated than most peer funds. For extremely liquid exposure with extra emphasis on leading health care names, XLV is tough to beat.

Financial Select Sector SPDR Fund (XLF)
*MSCI ESG Fund Rating of BB based on a score of 4.26 out of 10

Financial Select Sector SPDR Fund (XLF) offers extremely liquid exposure to the heavyweights in the US financials segment. Its cap-weighted, S&P 500-only portfolio means that it’s concentrated in large banks and avoids small-caps. XLF is large and massively liquid, far outpacing its peers in trading volume. A low fee and tight tracking round out the package of very low all-in costs. For many investors and traders, XLF is the go-to ETF for financials exposure, although there are more comprehensive funds out there for long-term exposure.

Note: XLF spun off its real estate exposure in September 2016, consistent with the GICS reclassification that elevated real estate to sector-level status. The change was material: Real estate comprised about 20% of the fund at the time. For each share held, XLF shareholders as of 9/16/16 received 0.139146 shares of XLRE, State Stret Global Advisors’ real estate ETF. (Immediately prior to the distribution, XLF had swapped its REITs for shares of XLRE.)

Consumer Staples Select Sector SPDR Fund (XLP)
*MSCI ESG Fund Rating of AA based on a score of 7.18 out of 10.

Consumer Staples Select Sector SPDR Fund (XLP) delivers a representative if slightly conservative basket of consumer-staples firms. Because XLP pulls its stocks from the S&P 500 rather than the broad market, it holds far fewer names than our benchmark, producing somewhat-concentrated exposure. The fund’s holdings are nearly all large-caps, which investors may appreciate for their familiarity and stability. XLP’s stake in Walmart may seem unremarkable; however, some competing ETFs (and our benchmark) don’t hold the retailer due to differing sector classification rules. Investors can make up their own mind on this point but should be aware of this critical difference. XLP’s expense ratio ranks among the cheapest in the sector, its asset base is solid, and the fund’s extremely strong liquidity keeps transaction costs low.

Technology Select Sector SPDR Fund (XLK)
*MSCI ESG Fund Rating of A based on a score of 6.15 out of 10.

Technology Select Sector SPDR Fund (XLK) offers fairly broad exposure to the US technology segment, but its S&P 500-only portfolio tilts away from our segment benchmark. XLK includes all of the big names associated with technology but also a few that seem like misfits, such as financial payment processers or telecom firms. Its limited selection universe excludes small-caps and most midcaps. Avoiding smaller, less-stable firms results in lower volatility and a tilt toward value compared to our broad tech-industry benchmark index, and can cause other minor performance differences. XLK is among the cheapest and largest funds in its segment and by far the most liquid—active traders need look no further. For many investors, XLK is the go-to choice in the segment.

Consumer Discretionary Select Sector SPDR Fund (XLY)
*MSCI ESG Fund Rating of BBB based on a score of 5.06 out of 10

Consumer Discretionary Select Sector SPDR Fund (XLY) delivers a cheap, liquid portfolio of large-cap consumer-discretionary stocks. The fund’s expense ratio ranks among the lowest in the segment while its AUM and daily trading volume tower over its competitors. XLY’s basket of stocks represents the sector well, despite concentration in the largest names. The fund pulls its holdings from the S&P 500, which differs from the broad-market universe used by competing funds in that it excludes small-caps and most midcaps. The resulting basket contains just a fraction of the names held by our more diverse benchmark; however, industry biases are small and XLY’s performance has been marketlike. The fund’s average market cap is higher than our benchmark’s, but overall XLY represents the space well at low all-in cost. The fund earns a spot on our Analyst Pick list for solid exposure at very low total cost.

SPDR S&P 500 ETF Trust (SPY)
*MSCI ESG Fund Rating of BBB based on a score of 5.69 out of 10.

SPDR S&P 500 ETF Trust (SPY) is the best-recognized and oldest ETF and typically tops rankings for largest AUM and greatest trading volume. The fund tracks the massively popular US index, the S&P 500. Few realize that S&P’s index committee chooses 500 securities to represent the US large-cap space—not necessarily the 500 largest by market cap, which can lead to some omissions of single names. Still, the index offers outstanding exposure to the US large-cap space. Unlike direct peers IVV and VOO, SPY is a unit investment trust, an older but entirely viable structure. As a UIT, SPY must fully replicate its index (it probably would anyway) and forgo the small risk and reward of securities lending. It also can’t reinvest portfolio dividends between distributions; the resulting cash drag will slightly hurt performance in up markets and help in downtrends. SPY is extremely cheap to hold, but is typically edged out by IVV and VOO in this respect. SPY’s phenomenal trading volume makes it the perfect vehicle for tactical traders and mom and pop investors alike.

*The MSCI ESG Fund Rating measures the resiliency of portfolios to long-term risks and opportunities arising from environmental, social, and governance factors. ESG Fund Ratings range from best (AAA) to worst (CCC). Highly rated funds consist of companies that tend to show strong and/or improving management of financially relevant environmental, social and governance issues. These companies may be more resilient to disruptions arising from ESG events.

Source: Etf.com


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