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Tap Large-Cap Stocks with This Fund

The Consumer Discretionary Select Sector SPDR Fund (XLY) tracks a market-cap-weighted index of consumer-discretionary stocks drawn from the S&P 500.

Consumer discretionary involves goods and services consumers consider to be non-essential, but desirable, if available income allows such purchases. This sector primarily includes industries such as retail, automobiles and components, consumer durables, apparel, hotels and restaurants.

The index includes Amazon (NASDAQ: AMZN), Home Depot (NYSE: HD), McDonald’s (NYSE: MCD), Nike (NYSE: NKE) and Ford (NYSE: F). XLY delivers a cheap, liquid portfolio of large-cap consumer-discretionary stocks.

XLY’s basket of stocks is intended to represent the sector well, despite concentration in the largest names. The fund pulls its holdings from the S&P 500, which differs from the broad-market universe used by competing funds, since this one excludes small-caps and most mid-caps. Industry biases are small. Overall, XLY represents the space well at low all-in cost.

Chart courtesy of StockCharts.com

XLY has almost $14 billion in assets under management and an average spread of 0.01%. The fund’s expense ratio of 0.13% ranks among the lowest in the segment, so it is much cheaper to buy compared to other exchange-traded funds. This fund’s trading volume towers over its competitors with an average of more than $483 million.

As for its riskiness, the Consumer Discretionary Select Sector SPDR Fund has an MSCI ESG Fund Rating of BBB, based on a score of 4.45 out of 10. The MSCI ESG Fund Rating measures the resiliency of portfolios to long-term risks and opportunities due to environmental, social and governance factors. ESG Fund Ratings range from best (AAA) to worst (CCC). Top-rated funds buy shares in companies that tend to show strong and/or improving management of financially relevant environmental, social and governance issues.

As always, I am happy to answer any of your questions about ETFs, so do not hesitate to send me an email. You just may see your question answered in a future ETF Talk.

In the name of the best within us,

Jim Woods

Jim Woods is a 20-plus-year veteran of the markets with varied experience as a broker, hedge fund trader, financial writer, author and newsletter editor. Jim is the editor of Intelligence Report, Investing Edge, the Bullseye Stock Trader, and The Deep Woods (formerly the Weekly ETF Report). His books include co-authoring, “Billion Dollar Green: Profit from the Eco Revolution,” and “The Wealth Shield: How to Invest and Protect Your Money from Another Stock Market Crash, Financial Crisis or Global Economic Collapse.” He’s also ghostwritten many books and articles, as well as edited content for some of the investment industry’s biggest luminaries. His articles have appeared on many leading financial websites, including StockInvestor.com, InvestorPlace.com, Main Street Investor, MarketWatch, Street Authority, Human Events and many others. Jim formerly worked with Investor’s Business Daily founder William J. O’Neil, helping to author training courses in the CANSLIM stock-picking methodology. The independent firm TipRanks rates Jim the No. 3 financial blogger in the world (out of more than 6,000). TipRanks calculates that, since 2012, he's made 361 successful recommendations out of 499 total, earning a success rate of 72% and a +15.3% average return per recommendation. He is known in professional and personal circles as “The Renaissance Man,” because his expertise includes such varied fields as composing and performing music; Western horsemanship, combat marksmanship, martial arts, auto racing and bodybuilding. Jim holds a BA in philosophy from the University of California, Los Angeles, and is a former U.S. Army paratrooper. A self-described “radical for capitalism,” he celebrates the virtue of making money from his Southern California horse ranch.