ETFs are a great investment vehicle for investors looking for decent returns over time and increased stability compared to just owning individual companies. The funds also allow increased exposure to some of the largest companies in the market at a reduced rate. With the increased uncertainty swirling around the stock market and a possible economic downturn looming, many investors have a much better opportunity to deal with the volatility with heavily diversified investments, as is the case with many different ETFs out there.
Top-ranked sector ETFs, like the ones I mention below, are important because they give a realistic snapshot of how different areas of the market are doing as a whole. I chose the best sector ETFs with the best returns over the past year.
Technology Select Sector SPDR Fund (XLK)
Technology Select Sector SPDR Fund (NYSEARCA:XLK) tracks the S&P Technology Select Sector Index, composed of large-cap information technology companies in the S&P 500. The fund was created on December 16, 1998, and offers exposure to many companies in the technology space.
Technology Select Sector SPDR Fund has returned 18% over the past year. It has an expense ratio of 0.10%, a dividend yield of 0.76% paid out quarterly, and over $50 billion in assets under management.
The fund has over 65 holdings, primarily in software, semiconductors and technology hardware companies. Here are its top three holdings.
- Apple (NASDAQ:AAPL) is an electronics manufacturer and entertainment service provider that makes up 23% of the total fund.
- Microsoft (NASDAQ:MSFT) is a software service company that makes up 22% of the ETF.
- Nvidia (NASDAQ:NVDA) is a company that produces computer hardware, such as semiconductors, and takes up 5% of XLK.
Energy Select Sector SPDR Fund (XLE)
Energy Select Sector SPDR Fund (NYSEARCA:XLE) tracks the S&P Energy Select Sector Index, built with large-cap energy companies within the S&P 500. The fund was also created in 1998. And offers exposure to many different energy companies.
Energy Select Sector SPDR Fund has returned 18% over the past year. It has an expense ratio of 0.10%, a dividend yield of 3.67% paid out quarterly, and $37 billion in assets under management.
The fund has 26 holdings, 90% of which are oil and gas companies the remaining 10% are energy equipment companies. XLE’s top holdings include the following.
- Exxon Mobil (NYSE:XOM) is an oil and natural gas exploration company that makes up 21% of the fund.
- Chevron (NYSE:CVX) is an energy company that engages in the exploration and production of crude oil and refining petroleum products that make up 18%.
- Schlumberger (NYSE:SLB) provides technology solutions for the oil and gas industry, making up 5% of the total ETF.
Industrial Select Sector SPDR Fund (XLI)
Industrial Select Sector SPDR Fund (NYSEARCA:XLI) tracks the S&P Industrial Select Sector Index, which has large-cap industrial companies in the S&P 500. The fund offers exposure to industrial companies with a solid record of returns.
Industrial Select Sector SPDR Fund has returned 14% over the past year. It has an expense ratio of 0.10%, a dividend yield of 1.54% paid quarterly, and $16 billion in assets under management.
The fund has 79 holdings, mainly filled with companies specializing in machinery, aerospace and defense, transportation and logistics. Some of XLI’s top holdings will likely look familiar to investors.
- Caterpillar (NYSE:CAT) is a company that produces mining and construction equipment making up 4% of the fund.
- Union Pacific (NYSE:UNP) operates in the railroad business, comprising 4% of the total fund.
- Boeing (NYSE:BA) manufactures aircraft and works on many projects for the government. XLI’s holdings in this company also equal 4%.
As of this writing, Noah Bolton did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
