Should You Invest in the State Street Energy Select Sector SPDR ETF (XLE)?

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

Passively managed ETFs are becoming increasingly popular with institutional as well as retail investors due to their low cost, transparency, flexibility and tax efficiency. They are excellent vehicles for long term investors.

Investor-friendly, sector ETFs provide many options to gain low risk and diversified exposure to a broad group of companies in particular sectors. Energy - Broad is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 9, placing it in bottom 44%.

Index Details

The fund is sponsored by State Street Investment Management. It has amassed assets over $41.48 billion, making it the largest ETF attempting to match the performance of the Energy - Broad segment of the equity market. XLE seeks to match the performance of the Energy Select Sector Index before fees and expenses.

The Energy Select Sector Index includes companies from the following industries: oil, gas & consumable fuels and energy equipment & services.

Costs

When considering an ETF's total return, expense ratios are an important factor, and cheaper funds can significantly outperform their more expensive counterparts in the long term if all other factors remain equal.

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

It has a 12-month trailing dividend yield of 2.4%.

Sector Exposure and Top Holdings

While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

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

The top 10 holdings account for about 72.56% of total assets under management.

Performance and Risk

The ETF return is roughly 42.88% so far this year and is up about 46.65% in the last one year (as of 08/25/2026). In that past 52-week period, it has traded between $42.61 and $63.75.

The ETF has a beta of 0.42 and standard deviation of 21.43% for the trailing three-year period, making it a high risk choice in the space. With about 24 holdings, it has more concentrated exposure than peers.

Alternatives

State Street Energy Select Sector SPDR ETF holds a Zacks ETF Rank of 1 (Strong Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, XLE is an outstanding option for investors seeking exposure to the Energy ETFs segment of the market. There are other additional ETFs in the space that investors could consider as well.

iShares Global Energy ETF (IXC) tracks S&P Global 1200 Energy Sector Index and the Vanguard Energy Index Fund ETF Shares (VDE) tracks MSCI US Investable Market Energy 25/50 Index. iShares Global Energy ETF has $2.83 billion in assets, Vanguard Energy Index Fund ETF Shares has $10.77 billion. IXC has an expense ratio of 0.4%, and VDE 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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