Is it worth investing in the selected industrial sector ETF SPDR (XLI)? – May 28, 2024

The Industrial Select Sector SPDR ETF fund launched on December 16, 1998 (XLI – Free Report is a passively managed, listed fund whose task is to provide broad exposure to the stock market in the Industrials – Broad segment.

Retail and institutional investors are increasingly turning to passively managed ETFs because they offer low costs, transparency, flexibility and tax efficiency; these types of funds are also a great tool for long-term investors.

Additionally, sector ETFs offer convenient ways to gain low risk and diversified exposure to a wide range of companies in specific sectors. Industry – Broad is one of the 16 broad Zacks Industry Sectors. It currently ranks 4th, ranking in the top 25%.

Index details

The fund’s sponsor is State Street Global Advisors. It has accumulated assets of over $18.43 billion, making it the largest ETF attempting to match the performance of the Industrials-Broad segment of the equity market. XLI seeks to match the performance of the Industrial Select Sector Index before fees and expenses.

The Industrial Select Sector Index includes companies from the following industries: industrial conglomerates; Space and Defense; machinery; air freight and logistics; roads and railways; commercial services and supplies; electrical equipment; Construction Engineering; construction products; Airlines; and trading companies and distributors.

Costs

Cost is an important factor when choosing the right ETF, and cheaper funds can significantly outperform their more expensive counterparts, all other fundamentals being equal.

The annual operating costs of this ETF are 0.09%, making it one of the cheapest products on the market.

Its trailing 12-month dividend yield is 1.48%.

Sector exposure and largest assets

ETFs offer diversified exposure, thereby minimizing the risk of individual stocks, but it is still important to familiarize yourself with the fund’s holdings before investing. Most ETFs are very transparent products, and many of them disclose their holdings on a daily basis.

This ETF has the largest allocation to the industrial sector – approximately 100% of the portfolio.

Looking at individual holdings, General Electric Co (GE – Free Report) accounts for approximately 4.92% of total assets, followed by Caterpillar Inc (CAT – Free Report) and Uber Technologies Inc (UBER – Free Report).

The 10 largest holdings account for approximately 36.28% of total assets under management.

Performance and risk

The ETF added approximately 9.52%, and this year and last year (as of May 28, 2024) increased by approximately 28.43%, respectively. Over the last 52 weeks, XLI has traded between $96.44 and $125.96.

The ETF has a beta of 1.09 and a standard deviation of 17.02% for the trailing three-year period, making it a medium-risk pick in this area. Holding approximately 81 shares, it effectively diversifies company-specific risk.

Alternatives

The Industrial Select Sector SPDR ETF carries a Zacks ETF Rank of 2 (Buy), which is based on asset class expected return, expense ratio, and momentum, among other factors. For this reason, XLI is an excellent option for investors seeking exposure to the industrial ETF market. There are other additional ETFs on the market that investors may also consider.

First Trust Industrials/Producer Durables AlphaDEX ETF (FXR – Free Report) tracks the StrataQuant Industrials Index and the Vanguard Industrials ETF (VIS – Free Report) tracks the MSCI US Investable Market Industrials 25/50 Index. The First Trust Industrials/Producer Durables AlphaDEX ETF has $1.93 billion in assets and the Vanguard Industrials ETF has $5.34 billion. FXR has an expense ratio of 0.61% and VIS fees are 0.10%.

Bottom line

To learn more about this product and other ETFs, find products that match your investment goals, and read articles on the latest developments in the world of ETF investing, visit the Zacks ETF Center.

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