Launched on 12/16/1998, the Health Care Select Sector SPDR ETF (XLV) is a passively managed exchange traded fund designed to provide a broad exposure to the Healthcare - Broad segment of the equity market.
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. Healthcare - Broad is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 4, placing it in top 25%.
Index Details
The fund is sponsored by State Street Global Advisors. It has amassed assets over $39.37 billion, making it the largest ETF attempting to match the performance of the Healthcare - Broad segment of the equity market. XLV seeks to match the performance of the Health Care Select Sector Index before fees and expenses.
The Health Care Select Sector Index includes companies from the following industries: pharmaceuticals; health care providers & services; health care equipment & supplies; biotechnology; life sciences tools & services; and health care technology.
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 0.09%, making it one of the least expensive products in the space.
It has a 12-month trailing dividend yield of 1.56%.
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 Healthcare sector--about 100% of the portfolio.
Looking at individual holdings, Eli Lilly + Co (LLY) accounts for about 12.14% of total assets, followed by Unitedhealth Group Inc (UNH) and Johnson + Johnson (JNJ).
The top 10 holdings account for about 57% of total assets under management.
Performance and Risk
The ETF has added roughly 7.17% so far this year and was up about 5.45% in the last one year (as of 02/04/2025). In that past 52-week period, it has traded between $136.28 and $157.24.
The ETF has a beta of 0.68 and standard deviation of 14.12% for the trailing three-year period, making it a medium risk choice in the space. With about 63 holdings, it effectively diversifies company-specific risk.
Alternatives
Health Care 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, XLV is an outstanding option for investors seeking exposure to the Health Care ETFs segment of the market. There are other additional ETFs in the space that investors could consider as well.
IShares Global Healthcare ETF (IXJ) tracks S&P Global 1200 Healthcare Sector Index and the Vanguard Health Care ETF (VHT) tracks MSCI US Investable Market Health Care 25/50 Index. IShares Global Healthcare ETF has $3.83 billion in assets, Vanguard Health Care ETF has $17.53 billion. IXJ has an expense ratio of 0.41% and VHT charges 0.10%.
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 key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week.
Health Care Select Sector SPDR ETF (XLV): ETF Research Reports
UnitedHealth Group Incorporated (UNH) : Free Stock Analysis Report
Johnson & Johnson (JNJ) : Free Stock Analysis Report
Eli Lilly and Company (LLY) : Free Stock Analysis Report
Vanguard Health Care ETF (VHT): ETF Research Reports
iShares Global Healthcare ETF (IXJ): ETF Research Reports
To read this article on Zacks.com click here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
