Designed to provide broad exposure to the Consumer Discretionary - Broad segment of the equity market, the Consumer Discretionary Select Sector SPDR ETF (XLY) is a passively managed exchange traded fund launched on 12/16/1998.
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.
Additionally, sector ETFs offer convenient ways to gain low risk and diversified exposure to a broad group of companies in particular sectors. Consumer Discretionary - Broad is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 14, placing it in bottom 13%.
Index Details
The fund is sponsored by State Street Global Advisors. It has amassed assets over $14.48 billion, making it the largest ETF attempting to match the performance of the Consumer Discretionary - Broad segment of the equity market. XLY seeks to match the performance of the Consumer Discretionary Select Sector Index before fees and expenses.
The Consumer Discretionary Select Sector Index seeks to provide an effective representation of the consumer discretionary 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 0.10%, making it one of the least expensive products in the space.
It has a 12-month trailing dividend yield of 0.97%.
Sector Exposure and Top Holdings
It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
This ETF has heaviest allocation in the Consumer Discretionary sector--about 100% of the portfolio.
Looking at individual holdings, Amazon.com Inc. (AMZN) accounts for about 23.02% of total assets, followed by Tesla Inc. (TSLA) and Home Depot Inc. (HD).
The top 10 holdings account for about 72.66% of total assets under management.
Performance and Risk
The ETF has gained about 15.23% and is down about -0.74% so far this year and in the past one year (as of 05/11/2023), respectively. XLY has traded between $126.26 and $172.97 during this last 52-week period.
The ETF has a beta of 1.18 and standard deviation of 25.38% for the trailing three-year period, making it a medium risk choice in the space. With about 55 holdings, it effectively diversifies company-specific risk.
Alternatives
Consumer Discretionary 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, XLY is an excellent option for investors seeking exposure to the Consumer Discretionary ETFs segment of the market. There are other additional ETFs in the space that investors could consider as well.
First Trust Consumer Discretionary AlphaDEX ETF (FXD) tracks StrataQuant Consumer Discretionary Index and the Vanguard Consumer Discretionary ETF (VCR) tracks MSCI US Investable Market Consumer Discretionary 25/50 Index. First Trust Consumer Discretionary AlphaDEX ETF has $1.24 billion in assets, Vanguard Consumer Discretionary ETF has $4.16 billion. FXD has an expense ratio of 0.61% and VCR 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.
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Get it free >>Consumer Discretionary Select Sector SPDR ETF (XLY): ETF Research Reports
Amazon.com, Inc. (AMZN) : Free Stock Analysis Report
The Home Depot, Inc. (HD) : Free Stock Analysis Report
Tesla, Inc. (TSLA) : Free Stock Analysis Report
Vanguard Consumer Discretionary ETF (VCR): ETF Research Reports
First Trust Consumer Discretionary AlphaDEX ETF (FXD): ETF Research Reports
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
