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Established on Dec. 16, 1998, the Financial Select Sector SPDR Fund (XLF) aims to provide investment results similar to the performance of the S&P Financial Select Sector Index by allocating its holdings similar to the index’s holdings.
XLF aims to track the financial sector and allocates its fund in the banking, insurance, real estate investment trust (REIT), capital markets, diversified financial services, consumer finance, real estate management and development, thrifts, and mortgage finance industries.
As of Jan. 23, 2022, the XLF Fund’s top 10 holdings were Berkshire Hathaway Inc. Class B (BRK.B), JPMorgan Chase & Company (JPM), Bank of America Corporation (BAC), Wells Fargo & Company (WFC), Citigroup Incorporated (C), Charles Schwab Corporation (SCHW), Morgan Stanley (MS), Goldman Sachs Group Incorporated (GS), BlackRock Inc. (BLK), , and American Express Company (AXP).
Key Takeaways
- The Financial Select Sector SPDR Fund (XLF) seeks to track the S&P Financial Select Sector Index.
- The fund is an open-end investment entity that is managed by State Street Global Advisors and is listed on the New York Stock Exchange Arca.
- The fund has an expense ratio of 0.12%, meaning its costs are lower than many exchange-traded funds (ETFs) that track the sector, high liquidity, and a tight bid-ask spread.
- Capital is allocated to the banking, insurance, real estate investment trust (REIT), capital markets, diversified financial services, consumer finance, real estate management and development, thrifts, and mortgage finance industries.
- Top holdings of the fund include Berkshire Hathaway, JPMorgan Chase, Bank of America, Wells Fargo, Citigroup, Morgan Stanley, and American Express.
Financial Select Sector SPDR Fund (XLF) Characteristics
The Financial Select Sector SPDR ETF is an open-end investment company, which is managed by State Street Global Advisors Funds Management Incorporated. XLF is listed on the New York Stock Exchange Arca. In 2021, the average daily trading volume of was around 65 million shares. The high liquidity and the depth of this fund allow for a tight bid-ask spread.
The Financial Select Sector SPDR Fund’s gross expense ratio of 0.12% is low, relative to other exchange-traded funds (ETFs) that track the financial sector. State Street Global Advisors is able to maintain that low expense ratio because it engages in securities lending.
The Financial Select Sector SPDR Fund has a gross expense ratio of 0.12%, a much lower figure than other exchange-traded funds in the financial sector.
Financial Select Sector SPDR Fund (XLF) Suitability and Recommendations
Investing in the Financial Select Sector SPDR Fund requires a high-risk tolerance. When compared to the SPDR S&P 500 ETF Trust (SPY), the standard deviation of XLF was almost 1.5x greater than the SPY’s standard deviation over the same period.
The financial sector is exposed to a plethora of risks, such as market risk, currency risk, interest rate risk, and macroeconomic risk. Investors and potential investors should follow worldwide economic conditions and keep in mind any economic data that could affect financial companies.
The biggest holding in the Financial Select Sector Fund (XLF) is Berkshire Hathaway, with more than 13% of the fund’s assets.
As of December 31, 2021, XLF had a trailing five-year alpha of -0.56, beta of 1.23, R-squared value of 79.64, a standard deviation of 23.48%, and a 5-year annualized return of 13.62% compared to its benchmark return of 14.64%. In that same period, the Financial Select Sector SPDR Fund had a Sharpe ratio of 0.76, while the MSCI ACWI USD index had a Sharpe ratio of 0.80.
The Financial Select Sector SPDR Fund has a comprehensive portfolio with 65 holdings, which aids in mitigating company risks. The ETF is best suited for investors who are willing to take on an above-average level of risk and pursue overweight exposure to the U.S. financial services industry.
The Bottom Line
The Financial Select Sector SPDR Fund (XLF) is a diversified fund with many blue-chip companies in its portfolio. It covers a variety of industries within the financial sector, has generated strong returns, has high liquidity, and is a medium-cost investment.
For investors looking to gain exposure to the financial services sector, XLF can be a good investment option, depending on the investor’s risk profile and investment goals. Investors can also look for similar ETFs concentrated in the financial sector that come with varying expense ratios.
How Do I Find the XLF Stock Price?
The price of the XLF fund is published every day on a variety of fund-tracking websites, such as Yahoo Finance, Nasdaq and the Wall Street Journal. You can also find it on the website for State Street.
What Stocks Comprise XLF?
The Financial Select Sector SPDR Fund (XLF) is a basket of stocks representing investment banks, insurance funds, and other financial companies in the S&P 500. The largest single holding is Berkshire Hathaway, representing about 13.24% of the fund’s total value, and JPMorgan Chase, with about 10%.
Is XLF Actively Managed?
The Financial Select Sector SPDR Fund (XLF) is passively managed, meaning that the firm running the fund chooses investments that reflect the Financial Select Sector Index. The management firm does not attempt to pick stocks that will beat the index, or outperform the wider market–it only tracks a specific group of companies. This allows the fund to reflect the overall results of the finance sector, while keeping fund expenses low.
What Is the XLF Dividend Yield?
The Dividend Yield of the Financial Select Sector SPDR Fund (XLF) is 1.63% of the fund’s total net asset value, as of Q1 2022.
How Has the XLF ETF Performed?
The Financial Select Sector SPDR Fund has gained about 5% every year, since its inception in 1998.