The Role of Energy Sector ETF XLE in Portfolio Diversification

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The global economy, including the United States, operates on energy, with petroleum and the price of oil playing a pivotal role. This reality underscores the importance of the energy sector in a diversified investment portfolio. Despite the growing traction of renewable energy, the undeniable fact remains that many goods and services rely on fossil fuels for transportation.

The Energy Select Sector SPDR Fund (XLE), an Exchange Traded Fund (ETF), offers an affordable and straightforward way to diversify your portfolio with exposure to the energy sector. With over $37 billion in assets under management and a low total expense ratio of 0.10%*, XLE provides easy access to this crucial sector.

The fund's largest holdings** are Exxon Mobil and Chevron, accounting for 40% of the ETF. Both of these companies have significant renewable operations, demonstrating the transition towards cleaner energy. However, the global economy continues to be driven by oil and natural gas, making them vital considerations for investors.

Besides these two energy giants, other key holdings include EOG Resources (4.80%), ConocoPhillips (4.58%), and Marathon Petroleum (4.55%). These companies represent a mix of fossil fuel sources, renewable energy sources, and energy service providers, further broadening the sector exposure.

Navigating the Volatility of the Energy Sector with XLE

In addition to oil, XLE also provides exposure to the natural gas industry. Many companies in XLEs holdings, such as Exxon Mobil, operate natural gas units. The demand dynamics for natural gas differ from oil, often influenced by weather conditions, reinforcing the need for exposure to both oil and natural gas in an energy-focused portfolio.

XLE is actively traded, with an average daily trading volume of 20 million shares in 2023. It pulls its stocks from the S&P 500, favoring large-cap companies. Holdings are weighted by market cap and subject to a capping methodology that ensures no single security exceeds 25% at each quarterly rebalance.

The energy sector can be volatile, but its importance to the economy remains steady. Using an ETF like XLE allows for broad exposure to ride out the highs and lows of companies in the sector. Ignoring this sector could mean missing a potential driver of the global economy that investors can capitalize on.

Investing in a fund like XLE offers equity exposure to these industries. Balancing a portfolio with an energy component is important for diversification and it can be straightforward with an energy sector ETF like XLE.

Recognizing the crucial role of energy in the world economy should be a key investor consideration. XLE offers targeted exposure to U.S. energy firms and provides a simple way to add an energy sleeve to your diversified portfolio.

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.

*Ordinary brokerage fees apply

**Holdings, Weightings & Assets as of 11/30/23 subject to change

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: [email protected]

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.

SEL007119 EXP 1/31/24

Contact Details

Dan Dolan

+1 203-935-8103

[email protected]

Company Website

https://www.sectorspdrs.com/

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