Is it worth investing in the Materials Select SPDR ETF (XLB) sector?

Founded on December 16, 1998, the Materials Select Sector SPDR ETF (XLB) is a passively managed, exchange-traded fund designed to provide broad exposure to a broad segment of the Materials equity market.

Passively managed ETFs are becoming increasingly popular among institutional and retail investors due to their low cost, transparency, flexibility and tax efficiency. They are perfect instruments 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. Materials – Broad is one of the 16 broad Zacks Sectors in the Zacks Industry Ranking. It currently ranks 16th, sitting at a low of 0%.

Index details

The fund’s sponsor is State Street Global Advisors. It has accumulated assets of more than $5.34 billion, making it one of the largest ETFs trying to match the performance of the broad segment of the stock market. XLB seeks to match the performance of the Materials Select sector index before taking into account fees and expenses.

The Materials Select Sector Index is designed to effectively represent the materials sector in the S&P 500 Index.

Costs

When considering an ETF’s total return, expense ratios are an important factor, and cheaper funds can significantly outperform their more expensive counterparts over the long term if all other factors remain constant.

The annual operating costs of this ETF are 0.10%, making it one of the cheapest products on the market.

Its trailing 12-month dividend yield is 2.22%.

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 Materials sector – approximately 100% of the portfolio.

Looking at individual holdings, Linde Plc (LIN) holds about 16.74% of total assets, followed by Air Products And Chemicals Inc. (APD) and Sherwin-Williams Company (SHW).

The 10 largest holdings account for approximately 61.14% of total assets under management.

Performance and risk

Year-to-date, the Materials Select Sector SPDR ETF has lost approximately -13.61% so far, and has declined approximately -11.53% over the past 12 months (as of 11/08/2022). Over the last 52 weeks, XLB has traded between $67.32 and $90.61.

The ETF has a beta of 1.04 and a standard deviation of 27.84% for the trailing three-year period, making it a medium-risk pick in this space. It has approximately 30 farms and has more concentrated exposure than comparable farms.

Alternatives

Materials 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, XLB is a great option for investors looking for exposure to the ETF materials market segment. There are other additional ETFs on the market that investors may also consider.

The SPDR S&P Global Natural Resources ETF (GNR) tracks the S&P Global Natural Resources Index, and the FlexShares Morningstar Global Upstream Natural Resources ETF (GUNR) tracks the Morningstar Global Upstream Natural Resources Index. The SPDR S&P Global Natural Resources ETF has $3.41 billion in assets and the FlexShares Morningstar Global Upstream Natural Resources ETF has $7.04 billion. GNR has an expense ratio of 0.40% and GUNR fees are 0.46%.

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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Resources Select Sector SPDR ETF (XLB): ETF Research Reports

Air Products and Chemicals, Inc. (APD): Free Inventory Analysis Report

The SherwinWilliams Company (SHW): Free Stock Analysis Report

Linde plc (LIN): Free stock analysis report

SPDR S&P Global Natural Resources ETF (GNR): ETF Research Reports

FlexShares Morningstar Global Upstream Natural Resources ETF (GUNR): ETF Research Reports

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