1 Risky ETF to Avoid Buying in December

• This fashionable assemblage ETF is up period to date, but it could beryllium a risky stake successful the 2nd fractional of December.

• If vacation spending appears tepid, that'd beryllium a headwind for this fund.

• Some of its holdings are known to slump successful December's second stages.

• 10 stocks we similar amended than Select Sector SPDR Trust - State Street Financial Select Sector SPDR ETF ›

December is typically a favorable period for owning stocks. The last period of the twelvemonth brings hopes of Santa Claus rallies, and it sits firmly successful the champion six-month play for equities. Those are among the reasons wherefore the S&P 500 averages a December summation of 0.6% implicit the past 20 years.

That's a favorable precedent, but it's not a warrant of occurrence crossed each sectors. Before getting into the vacation spirit, investors whitethorn privation to reappraisal the exchange-traded funds (ETFs) they ain for imaginable issues successful December.

The Financial Select Sector SPDR ETF (NYSEMKT: XLF), the largest ETF successful its category, could beryllium to beryllium a risky assemblage money to ain arsenic December progresses. Let's analyse why.

It is worthy noting that portion this assemblage ETF whitethorn taxable investors to much hazard aboriginal this month, it has accrued by astir 3% connected a month-to-date basis, and December weakness isn't the norm for this fund. To beryllium fair, the ETF averaged a December summation of 1.47% since 2010.

The ETF's caller spot and its December way grounds enactment the conception that a bear market is unlikely, nor is the specter of much hazard an invitation to abbreviated this fund. All that said, immoderate cautionary warnings are indispensable erstwhile discussing this SPDR ETF.

First, U.S. Bancorp (NYSE: USB) and Moody's (NYSE: MCO) -- 2 of this ETF's holdings -- often retreat successful the 2nd fractional of December. Over the past decade, these 2 person been among the worst-performing members of the S&P 500, careless of sector, successful the second fractional of December.

Second, the Federal Reserve conscionable lowered interest rates for a 3rd time. While that's viewed arsenic affirmative for the broader markets, little involvement rates mean banks are lending astatine little rates, and the returns security providers make connected collected premiums are pinched. Those are credible risks to this ETF due to the fact that the money devotes much than 40% of its roster to slope and security stocks.

Third, if consumers rein successful vacation spending, this ETF could beryllium pinched. When shoppers consciousness assured astir the economy, they thin to splurge successful December, perchance accumulating recognition paper indebtedness on the way. That isn't bully for consumers, but it's affirmative for this ETF due to the fact that 4 of the apical 5 U.S. recognition paper issuers are among its 10 apical holdings. If shoppers don't ringing the registry this month, that could make immoderate near-term hazard for this fund.