The Financial Select Sector SPDR ETF Just Improved Its Risk/Return Profile

If you exclude the energy sector that got crushed by plunging oil prices, the worst performing sector over the past three years has been the financials. That's what tends to happen when you operate in one of the lowest interest rate environments in history. Given the limited prospects for improved profitability and the uncertain nature of the path of future interest rates, financials are priced at bargain levels. And now that the fund has spun off its real estate holdings, it looks like an even better deal.


To provide a little background, the Global Industry Classification Standard (GICS) decided to promote real estate to headline-level sector status making it the 11th such sector overall. As a result, the Financial Select Sector SPDR ETF (NYSEARCA:XLF) spun off $3 billion in REIT holdings over to the Real Estate Select Sector SPDR (NYSEARCA:XLRE).

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