ETF Education Report: STATE STREET(R) REAL ESTATE SELECT SECTOR SPDR(R) ETF (XLRE)

What this ETF is trying to do

The XLRE ETF is designed to track the real estate sector. Instead of buying just one building or one company, this ETF allows investors to own a small piece of many different real estate companies at once.

What the numbers show

When looking at how an ETF performs, it is important to know the difference between "price return" and "total return."

• Price Return only measures how much the share price itself has changed.

• Total Return includes both the change in share price AND any cash payments (distributions) the ETF gave to investors.

For XLRE, here is what the data shows:

• Year-to-Date (YTD): The price return is approximately 5.40%, while the total return is approximately 7.02%.

• One Year: The price return was approximately 1.12%, and the total return was approximately 4.58%.

• Three Years: The price return was approximately 17.55%, and the total return was approximately 29.11%.

An estimated price from roughly one year ago was $42.06. The current price is $42.53.

Income and distribution explanation

Some investors look for ETFs that pay out cash, which is called a "distribution." XLRE has a distribution yield of approximately 3.30%. This means the cash payments represent about 3.30% of the ETF's price. These distributions usually happen four times a year (quarterly).

It is important to remember that a high distribution yield is not the same thing as total return. Total return tells you the whole story of how much value was gained, including those cash payments.

NAV erosion explanation

"NAV erosion" is a term used to describe when the value of the underlying assets in an ETF decreases over time. It is important not to confuse a falling share price with NAV erosion. A share price can go down for many reasons, even if the actual value of the assets remains steady.

For this ETF, the erosion-risk score is 94, which is labeled as "Stable / sideways." The erosion severity is rated as "good," and there is no severe erosion-risk flag.

Top Holdings

The following are the top holdings in this ETF (note that this is a partial list):

• WELLTOWER INC: 11.38%

• PROLOGIS INC: 8.74%

• EQUINIX INC: 7.03%

• AMERICAN TOWER CORP: 5.46%

• SIMON PROPERTY GROUP INC: 4.61%

• PUBLIC STORAGE: 4.50%

• VENTAS INC: 4.48%

• CBRE GROUP INC CLASS A: 4.46%

• DIGITAL REALTY TRUST INC: 4.44%

• VIVMARK RESIDENTIAL: 4.36%

Pros

• The ETF provides regular cash distributions (usually quarterly).

• The erosion-risk score suggests the fund is currently considered stable.

Cons

• The one-year price return (the change in share price alone) has been relatively low at approximately 1.12%.

Beginner takeaway

When studying XLRE, remember that the total return is higher than the price return. This happens because the ETF pays out cash distributions to investors. Always look at the total return to see the full picture of performance, and remember that high yields do not guarantee that the share price will stay the same.