Should You Invest in the State Street Consumer Discretionary Select Sector SPDR ETF (XLY)?

If you're interested in broad exposure to the Consumer Discretionary - Broad segment of the equity market, look no further than the State Street Consumer Discretionary Select Sector SPDR ETF (XLY), a passively managed exchange traded fund launched on December 16, 1998.

Retail and institutional investors increasingly turn to passively managed ETFs because they offer low costs, transparency, flexibility, and tax efficiency; these kind of funds are also 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. Consumer Discretionary - Broad is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 8, placing it in top 50%.

Index Details

The fund is sponsored by State Street Investment Management. It has amassed assets over $23.47 billion, making it the largest ETF attempting to match the performance of the Consumer Discretionary - Broad segment of the equity market. XLY seeks to match the performance of the Consumer Discretionary Select Sector Index before fees and expenses.

The Consumer Discretionary Select Sector Index seeks to provide an effective representation of the consumer discretionary sector of the S&P 500 Index.

Costs

Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.

Annual operating expenses for this ETF are 0.08%, making it one of the least expensive products in the space.

It has a 12-month trailing dividend yield of 0.76%.

Sector Exposure and Top Holdings

ETFs offer a diversified exposure and thus minimize single stock risk but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.

This ETF has heaviest allocation in the Consumer Discretionary sector -- about 100% of the portfolio.

The top 10 holdings account for about 69.31% of total assets under management.

Performance and Risk

The ETF has lost about 0.31% so far this year and was up about 3.97% in the last one year (as of 08/20/2026). In that past 52-week period, it has traded between $105.66 and $124.52.

The ETF has a beta of 1.21 and standard deviation of 20.68% for the trailing three-year period, making it a medium risk choice in the space. With about 50 holdings, it has more concentrated exposure than peers.

Alternatives

State Street Consumer Discretionary 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, XLY is a reasonable option for those seeking exposure to the Consumer Discretionary ETFs area of the market. Investors might also want to consider some other ETF options in the space.

iShares U.S. Home Construction ETF (ITB) tracks Dow Jones U.S. Select Home Construction Index and the Vanguard Consumer Discretionary Index Fund ETF Shares (VCR) tracks MSCI US Investable Market Consumer Discretionary 25/50 Index. iShares U.S. Home Construction ETF has $2.30 billion in assets, Vanguard Consumer Discretionary Index Fund ETF Shares has $6.12 billion. ITB has an expense ratio of 0.38%, and VCR charges 0.09%.

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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