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PROPERTY:

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Ever thought about what a multimillion pound budget would buy you?

Should You Invest in the Materials Select Sector SPDR ETF (XLB)?

Zacks Equity Research
·3-min read

The Materials Select Sector SPDR ETF (XLB) was launched on 12/16/1998, and is a passively managed exchange traded fund designed to offer broad exposure to the Materials - Broad segment of the equity market.

Retail and institutional investors increasingly turn to passively managed ETFs because they offer low costs, transparency, flexibility, and tax efficiency; these kind of funds are also excellent vehicles for long term investors.

Sector ETFs also provide investors access to a broad group of companies in particular sectors that offer low risk and diversified exposure. Materials - Broad is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 11, placing it in bottom 31%.

Index Details

The fund is sponsored by State Street Global Advisors. It has amassed assets over $7.66 billion, making it one of the largest ETFs attempting to match the performance of the Materials - Broad segment of the equity market. XLB seeks to match the performance of the Materials Select Sector Index before fees and expenses.

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The Materials Select Sector Index seeks to provide an effective representation of the materials sector of the S&P 500 Index.

Costs

Expense ratios are an important factor in the return of an ETF and in the long term, cheaper funds can significantly outperform their more expensive counterparts, other things remaining the same.

Annual operating expenses for this ETF are 0.12%, making it one of the least expensive products in the space.

It has a 12-month trailing dividend yield of 1.62%.

Sector Exposure and Top Holdings

ETFs offer a diversified exposure and thus minimize single stock risk but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.

This ETF has heaviest allocation in the Materials sector--about 100% of the portfolio.

Looking at individual holdings, Linde Plc (LIN) accounts for about 15.95% of total assets, followed by Sherwin-Williams Company (SHW) and Air Products And Chemicals Inc. (APD).

The top 10 holdings account for about 63.32% of total assets under management.

Performance and Risk

Year-to-date, the Materials Select Sector SPDR ETF has added roughly 20.93% so far, and was up about 31.92% over the last 12 months (as of 10/26/2021). XLB has traded between $61.94 and $88.68 in this past 52-week period.

The ETF has a beta of 1.06 and standard deviation of 26.32% for the trailing three-year period, making it a medium risk choice in the space. With about 30 holdings, it has more concentrated exposure than peers.

Alternatives

Materials Select Sector SPDR ETF holds a Zacks ETF Rank of 1 (Strong Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, XLB is an outstanding option for investors seeking exposure to the Materials ETFs segment of the market. There are other additional ETFs in the space that investors could consider as well.

Vanguard Materials ETF (VAW) tracks MSCI US Investable Market Materials 25/50 Index and the FlexShares Morningstar Global Upstream Natural Resources ETF (GUNR) tracks Morningstar Global Upstream Natural Resources Index. Vanguard Materials ETF has $3.92 billion in assets, FlexShares Morningstar Global Upstream Natural Resources ETF has $6.16 billion. VAW has an expense ratio of 0.10% and GUNR charges 0.46%.

Bottom Line

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Materials Select Sector SPDR ETF (XLB): ETF Research Reports
 
Air Products and Chemicals, Inc. (APD) : Free Stock Analysis Report
 
The SherwinWilliams Company (SHW) : Free Stock Analysis Report
 
Linde plc (LIN) : Free Stock Analysis Report
 
Vanguard Materials ETF (VAW): ETF Research Reports
 
FlexShares Morningstar Global Upstream Natural Resources ETF (GUNR): ETF Research Reports
 
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