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

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.

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 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 14, placing it in bottom 13%.

Index Details

The fund is sponsored by State Street Global Advisors. It has amassed assets over $4.80 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.

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 0.08%, making it the least expensive product in the space.

It has a 12-month trailing dividend yield of 2.18%.

Sector Exposure and Top Holdings

While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that 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 22.38% of total assets, followed by Sherwin Williams Co/the (SHW) and Air Products + Chemicals Inc (APD).

The top 10 holdings account for about 68.82% of total assets under management.

Performance and Risk

The ETF has lost about -6.96% so far this year and is down about -13.45% in the last one year (as of 04/07/2025). In that past 52-week period, it has traded between $77.88 and $97.63.

The ETF has a beta of 1.05 and standard deviation of 18.98% for the trailing three-year period, making it a medium risk choice in the space. With about 31 holdings, it has more concentrated exposure than peers.

Alternatives

Materials Select Sector SPDR ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, XLB is a reasonable option for those seeking exposure to the Materials ETFs area of the market. Investors might also want to consider some other ETF options in the space.

SPDR S&P Global Natural Resources ETF (GNR) tracks S&P Global Natural Resources Index and the FlexShares Morningstar Global Upstream Natural Resources ETF (GUNR) tracks Morningstar Global Upstream Natural Resources Index. SPDR S&P Global Natural Resources ETF has $2.44 billion in assets, FlexShares Morningstar Global Upstream Natural Resources ETF has $4.40 billion. GNR has an expense ratio of 0.40% 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.

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

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