Adding Portfolio Diversification with Energy ETF XLE
Denver, CO
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August 12, 2023 08:03 AM Eastern Daylight Time
The economic lifeblood of the U.S. economy is energy in all its forms. Our nation operates on an energy-based system, with petroleum playing a significant role in keeping our economy moving. Being such a key ingredient in how our economy functions is why the energy sector can play a crucial role in a diversified portfolio.
The energy sector can be volatile, but its importance to markets is steady. This sector plays a key role, whether during an economic recovery or downturn. How you approach adding an energy sleeve to your portfolio can be simple using the index-based exchange traded fund Energy Select Sector SPDR (XLE).
XLE offers exposure to U.S. energy firms, including companies in the oil, gas, and consumable fuels, and energy equipment and services industries.
SPDR ETF XLE pulls its stocks from the S&P 500 rather than the total market. The portfolio mainly favors large-caps. Holdings are weighted by market cap, meaning the bigger the company’s size, the bigger the holding they represent in XLE. The fund is also subject to a capping methodology that ensures no single security exceeds 25% at each quarterly rebalance.
Broad Sector Exposure
Rather than trying to pick a singular energy company, index investing allows for broad exposure to ride out the highs and lows of companies in the sector. But to ignore this sector is missing an obvious driver of our economy that investors can capitalize on.
XLE is appropriate for investors seeking targeted exposure to the energy sector. XLE holds a smaller and more focused selection of stocks than a broad index fund. The fund’s index is simple, investing in all S&P 500 energy stocks.
The energy industry is relatively small, approximately 4% of the S&P 500. As a result, XLE invests in 23 securities, while most broader equity indexes invest in hundreds of securities. The fund's two largest holdings*, energy giants Exxon Mobil and Chevron, account for 40% of the value of the fund. All the fund's holdings are U.S. energy stocks, as expected.
Rounding out the top holdings are: Schlumberger (5.44%), EOG Resources (4.74%), ConocoPhillips (4.71%), Marathon Petroleum (4.14%), Pioneer Natural Resources (3.87%), Phillips 66 (3.75%), Valero Energy (3.42%), and Occidental Petroleum (3.33%).
The above represents the energy sector from producers and drillers to energy servicing companies, as well as the energy sectors of petroleum, natural gas, and chemicals.
XLE is one of the leading energy sector ETFs, gathering more than $37 billion in assets under management since its inception in 1998. The fund is actively traded on the NYSE Arca and offers an investor-friendly expense ratio of 0.10%**.
Used by advisors and investors of all types, XLE offers access to the energy sector that belongs in any diversified portfolio. To ignore energy is to ignore potential opportunity.
DISCLAIMER: This is a work of research and should not be taken as investment or financial advice. Therefore, Select Sector SPDRs or the publisher is not liable for any decision made based on the publication.
About the Company:
Select Sector SPDR ETFs offer flexibility and customization opportunities. Many investors have similar outlooks, but no two are exactly alike. Select Sector SPDR ETFs let investors select the sectors that best meet their investment goals.
* Holdings, Weightings & Assets as of 7/31/23 subject to change
** Ordinary brokerage fees apply
DISCLOSURES
The S&P 500 Index is an unmanaged index of 500 common stocks that is generally considered representative of the U.S. stock market. The index is heavily weighted toward stocks with large market capitalizations and represents approximately two-thirds of the total market value of all domestic common stocks. The S&P 500 Index figures do not reflect any fees, expenses or taxes. An investor should consider investment objectives, risks, fees and expenses before investing.
One may not invest directly in an index.
Transparent ETFs provide daily disclosure of portfolio holdings and weightings
All ETFs are subject to risk, including loss of principal. Sector ETF products are also subject to sector risk and nondiversification risk, which generally will result in greater price fluctuations than the overall market. Diversification does not eliminate risk.
An investor should consider investment objectives, risks, charges and expenses carefully before investing. To obtain a prospectus, which contains this and other information, call 1-866-SECTOR-ETF (732-8673) or visit www.sectorspdrs.com. Read the prospectus carefully before investing.
ALPS Portfolio Solutions Distributor, Inc., a registered broker-dealer, is distributor for the Select Sector SPDR Trust.
Media Contact:
Company: Select Sector SPDRs
Contact: Dan Dolan*
Address: 1290 Broadway, Suite 1000, Denver, CO 80203
Country: United States
Email: dan.dolan@sectorspdrs.com
Website: https://www.sectorspdrs.com/
*Dan Dolan is a Registered Representative of ALPS Portfolio Solutions Distributor, Inc. ALPS Portfolio Solutions Distributor, Inc., a registered broker-dealer, is the distributor for the Select Sector SPDR Trust.
SEL006799 EXP 10/31/23
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Dan Dolan
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