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Should You Invest in the SPDR S&P Pharmaceuticals ETF (XPH)?

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Designed to provide broad exposure to the Healthcare - Pharma segment of the equity market, the SPDR S&P Pharmaceuticals ETF (XPH - Free Report) is a passively managed exchange traded fund launched on 06/19/2006.

An increasingly popular option among retail and institutional investors, passively managed ETFs offer low costs, transparency, flexibility, and tax efficiency; they are also excellent vehicles for long term investors.

Additionally, sector ETFs offer convenient ways to gain low risk and diversified exposure to a broad group of companies in particular sectors. Healthcare - Pharma is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 4, placing it in top 25%.

Index Details

The fund is sponsored by State Street Global Advisors. It has amassed assets over $201.88 million, making it one of the average sized ETFs attempting to match the performance of the Healthcare - Pharma segment of the equity market. XPH seeks to match the performance of the S&P Pharmaceuticals Select Industry Index before fees and expenses.

The S&P Pharmaceuticals Select Industry Index represents the pharmaceuticals sub-industry portion of the S&P Total Markets Index. The S&P TMI tracks all the US common stocks listed on the NYSE, AMEX, NASDAQ National Market and NASDAQ Small Cap exchanges. The Pharmaceuticals Index is a modified equal weight 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 0.35%, making it one of the least expensive products in the space.

It has a 12-month trailing dividend yield of 1.47%.

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 Healthcare sector--about 100% of the portfolio.

Looking at individual holdings, Eli Lilly + Co (LLY - Free Report) accounts for about 5.74% of total assets, followed by Intra Cellular Therapies Inc (ITCI - Free Report) and Elanco Animal Health Inc (ELAN - Free Report) .

The top 10 holdings account for about 51.15% of total assets under management.

Performance and Risk

Year-to-date, the SPDR S&P Pharmaceuticals ETF has added roughly 2.83% so far, and it's up approximately 4.42% over the last 12 months (as of 07/17/2024). XPH has traded between $35.20 and $45.49 in this past 52-week period.

The ETF has a beta of 0.76 and standard deviation of 20.17% for the trailing three-year period, making it a high risk choice in the space. With about 42 holdings, it has more concentrated exposure than peers.

Alternatives

SPDR S&P Pharmaceuticals 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, XPH is a reasonable option for those seeking exposure to the Health Care ETFs area of the market. Investors might also want to consider some other ETF options in the space.

VanEck Pharmaceutical ETF (PPH - Free Report) tracks MVIS US Listed Pharmaceutical 25 Index and the iShares U.S. Pharmaceuticals ETF (IHE - Free Report) tracks Dow Jones U.S. Select Pharmaceuticals Index. VanEck Pharmaceutical ETF has $632.15 million in assets, iShares U.S. Pharmaceuticals ETF has $658.85 million. PPH has an expense ratio of 0.36% and IHE charges 0.40%.

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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