What XLF actually is

XLF follows the financial companies in the S&P 500, one of the Select Sector SPDR funds.

What is inside

Large banks, insurers, payment networks and asset managers, among them Berkshire Hathaway, JPMorgan, Visa and Mastercard. Banks often make up the biggest slice.

Distributions

XLF pays quarterly. The yield is usually moderate, since banks pay dividends but need to keep capital. Bank dividends can be cut in a crisis, as happened in 2008.

What to keep in mind

  • Interest rates. They affect lending profits.
  • Credit cycles. Loan losses rise in recessions.
  • Regulation. Capital rules affect payouts.

Quick take

XLF is a cyclical sector fund with a moderate dividend, closely tied to the economy and interest rates.