Sector ETFs are cheap and highly liquid now. Industrials broadly covers many sub-sectors. Let's check out the best industrials ETFs for 2023.
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Introduction – Why Industrials ETFs?
The industrials sector refers to companies involved in supplies and equipment used in manufacturing and construction. Sub-sectors include aerospace and defense, transportation, professional services, machinery, logistics, etc.
The Industrials sector is closely tied to the broader economy. Industrials stocks tend to drop during periods of market turmoil. However, subsectors within Industrials may behave differently.
Below are the best Industrials ETFs.
The 5 Best Industrials ETFs
The Industrials ETFs below vary in scope and cost.
XLI – Industrial Select Sector SPDR Fund
The Industrial Select Sector SPDR Fund (XLI) is one of the most popular industrials ETFs, with over $18 billion in assets. It is also one of the oldest; the fund started in 1998.
SPDR ETFs are famous for their low tracking error and high liquidity, though nowadays this usually comes at a small cost; they're typically a tad more expensive than sector ETFs from other providers like Fidelity, Vanguard, etc.
XLI is a market cap weighted fund that holds industrials companies from the S&P 500 Index, meaning the fund is entirely large caps. Top 10 holdings include familiar names like Honeywell, Boeing, Caterpillar, GE, 3M, and Lockheed Martin.
This ETF seeks to track the S&P Industrial Select Sector Index and has 73 holdings and a fee of 0.12%.
VIS – Vanguard Industrials ETF
The Vanguard Industrials ETF (VIS) is cheaper than XLI above with a fee of 0.10% but is still highly liquid, with nearly $5 billion in assets. Day traders may still prefer the comparatively greater liquidity of XLI.
Conveniently, VIS is much broader than XLI, and reaches into mid, small, and even micro caps within the U.S. Because of this, VIS has slightly outperformed XLI historically.
VIS has over 350 holdings and seeks to track the MSCI US Investable Market Industrials 25/50 Index.
IYJ – iShares U.S. Industrials ETF
The iShares U.S. Industrials ETF (IYJ) is another broad U.S. Industrials ETF like the above two. Unfortunately, IYJ is much more expensive at 0.42%.
IYJ seeks to track the Dow Jones U.S. Industrials Index and has 193 holdings. The sector weightings of this fund are nearly the same as the above funds, but unlike VIS and XLI, IYJ interestingly includes Paypal and Accenture in its top 10 holdings.
FIDU – Fidelity MSCI Industrials Index ETF
The Fidelity MSCI Industrials Index ETF (FIDU) is the most affordable industrials ETF on this list at 0.08%. The fund seeks to track the MSCI USA IMI Industrials Index, providing broad exposure again to the U.S. Industrials sector.
FIDU can be considered comparable to VIS and XLI above but with lower AUM of about $700 million. This would still be a fine choice for long-term, buy-and-hold investors.
EXI – iShares S&P Global Industrials ETF
The above funds cover Industrials in the U.S. iShares S&P Global Industrials ETF (EXI) provides global exposure to Industrials. The fund seeks to track the S&P Global 1200 Industrials Sector Index.
The fund favors large caps but provides decent geographical diversification, but the U.S. still comprises about 50%. This global exposure increases costs; EXI has a fee of 0.46%.
Where To Buy These Industrials ETFs
All these industrials ETFs should be available at any major broker. My choice is M1 Finance. The broker has zero trade commissions and zero account fees, and offers fractional shares, dynamic rebalancing, and a modern, user-friendly interface and mobile app. I wrote a comprehensive review of M1 Finance here.
Disclaimer: While I love diving into investing-related data and playing around with backtests, this is not financial advice, investing advice, or tax advice. The information on this website is for informational, educational, and entertainment purposes only. Investment products discussed (ETFs, mutual funds, etc.) are for illustrative purposes only. It is not a recommendation to buy, sell, or otherwise transact in any of the products mentioned. I always attempt to ensure the accuracy of information presented but that accuracy cannot be guaranteed. Do your own due diligence. I mention M1 Finance a lot around here. M1 does not provide investment advice, and this is not an offer or solicitation of an offer, or advice to buy or sell any security, and you are encouraged to consult your personal investment, legal, and tax advisors. All examples above are hypothetical, do not reflect any specific investments, are for informational purposes only, and should not be considered an offer to buy or sell any products. All investing involves risk, including the risk of losing the money you invest. Past performance does not guarantee future results. Opinions are my own and do not represent those of other parties mentioned. Read my lengthier disclaimer here.
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