Should You Invest in the State Street Financial Select Sector SPDR ETF (XLF)?

If you're interested in broad exposure to the Financials - Broad segment of the equity market, look no further than the State StreetSTT-- Financial Select Sector SPDR ETF (XLF), a passively managed exchange traded fund launched on December 16, 1998.

Passively managed ETFs are becoming increasingly popular with institutional as well as retail investors due to their low cost, transparency, flexibility and tax efficiency. They are excellent vehicles for long term investors.

Sector ETFs are also funds of convenience, offering many ways to gain low risk and diversified exposure to a broad group of companies in particular sectors. Financials - Broad is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 3, placing it in top 19%.

Index Details

The fund is sponsored by State Street Investment Management. It has amassed assets over $45.98 billion, making it the largest ETF attempting to match the performance of the Financials - Broad segment of the equity market. XLFXLF-- seeks to match the performance of the Financial Select Sector Index before fees and expenses.

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

Costs

Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.

Annual operating expenses for this ETF are 0.08%, making it the least expensive product in the space.

It has a 12-month trailing dividend yield of 1.46%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.

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

The top 10 holdings account for about 56.63% of total assets under management.

Performance and Risk

The ETF has lost about 9.99% so far this year and it's up approximately 3.09% in the last one year (as of 03/17/2026). In that past 52-week period, it has traded between $43.92 and $56.4.

The ETF has a beta of 0.92 and standard deviation of 16.08% for the trailing three-year period, making it a medium risk choice in the space. With about 80 holdings, it effectively diversifies company-specific risk.

Alternatives

State Street Financial 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, XLF is an outstanding option for investors seeking exposure to the Financials ETFs segment of the market. There are other additional ETFs in the space that investors could consider as well.

iShares MSCI Europe Financials ETF (EUFN) tracks MSCI Europe Financials Index and the Vanguard Financials Index Fund ETF Shares (VFH) tracks MSCI US Investable Market Financials 25/50 Index. iShares MSCI Europe Financials ETF has $3.68 billion in assets, Vanguard Financials Index Fund ETF Shares has $12.16 billion. EUFN has an expense ratio of 0.49%, and VFH charges 0.09%.

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.

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This article originally published on Zacks Investment Research (zacks.com).

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