The Financial Select Sector SPDR ETF (XLF), the fourth exchange-traded fund (ETF) in our series on select sector ETFs, focuses on one of the larger sections of the S&P 500, with the financial sector amounting to about 16% of that index. XLF provides broad exposure to the U.S. financial services sector and seeks investment results that match the performance of the Financial Select Sector Index.
The Financial Select Sector Index includes the following industries, among others: insurance, consumer banks, diversified financial services and real estate management and development.
The financial sector is one area of the market that has not returned to its “precrisis highs” as spectacularly as others have. XLF is down 1.53% year to date, but it has risen nearly 10% since hitting its 2015 low in late August, as shown in the chart below. The current dividend yield is small, sitting at less than two percent, but so far it has risen slightly for all three quarters of 2015. XLF’s expense ratio is 0.14%, and it has over $18 billion in assets managed.
This fund’s top 10 holdings comprise about 48% of its total assets. Given the amount of assets XLF manages and its sizable role in the S&P 500, this number might seem rather low. Yet, nearly all of these 10 positions are well known names in the financial world. Warren Buffett’s Berkshire Hathaway (BRK-B) takes the top spot, with 8.56% of assets, closely followed by Wells Fargo (WFC), 8.48%. Other major holdings include financial services company JPMorgan, 8.10%; Bank of America Corporation (BAC), 5.32%; and banking and financial services giant Citigroup (C), 5.39%.
If a stake in the large, but slowly recovering, financial sector seems appealing to you, you may want to take a look at Financial Select Sector SPDR ETF (XLF). In this column next week, I’ll have another sector highlighted for your consideration.
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In case you missed it, I encourage you to read my e-letter column from last week about a technology-sector ETF. I also invite you to comment in the space provided below.