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

For those looking for exposure to the Materials – Broad segment of the equity market, the Materials Select Sector SPDR ETF (XLB) is a passively managed exchange traded fund that was launched on 12/16/1998. Retail and institutional investors are increasingly turning to passively managed ETFs due to their low costs, transparency, flexibility, and tax efficiency, making them excellent options for long-term investors.

Sector ETFs like XLB offer convenient ways to gain low-risk and diversified exposure to a broad group of companies in specific sectors. The Materials – Broad sector is one of the 16 broad Zacks sectors within the Zacks Industry classification and is currently ranked 15, placing it in the bottom 6%.

Sponsored by State Street Global Advisors, XLB has amassed assets over $5.52 billion, making it one of the largest ETFs attempting to match the performance of the Materials – Broad segment of the equity market. The fund seeks to match the performance of the Materials Select Sector Index before fees and expenses, which aims to provide an effective representation of the materials sector of the S&P 500 Index.

With annual operating expenses of 0.10%, XLB is one of the least expensive products in its space. It also boasts a 12-month trailing dividend yield of 2.07%. The ETF has the heaviest allocation in the Materials sector, with about 100% of the portfolio dedicated to it.

When looking at individual holdings, Linde Plc (LIN) accounts for about 20.58% of total assets, followed by Sherwin Williams Co/the (SHW) and Freeport Mcmoran Inc (FCX). The top 10 holdings make up approximately 65.83% of total assets under management.

In terms of performance and risk, XLB has lost about -3.27% so far this year and is up approximately 1.69% in the last one year (as of 01/24/2024). The ETF has a beta of 1.08 and a standard deviation of 19.81% for the trailing three-year period, making it a medium-risk choice in the space with more concentrated exposure compared to its peers.

Overall, the Materials Select Sector SPDR ETF (XLB) is a sufficient option for those seeking exposure to the Materials ETFs area of the market. Investors may also want to consider alternatives like SPDR S&P Global Natural Resources ETF (GNR) and FlexShares Morningstar Global Upstream Natural Resources ETF (GUNR) for additional options in the space. For more information on this product and other ETFs, visit Zacks ETF Center.

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