ARKK vs. XLC: What’s The Difference?

The ARK Innovation ETF (ARKK) and the Communication Services Select Sector SPDR Fund (XLC) are both among the Top 100 ETFs. ARKK is a ARK ETF Trust Mid-Cap Growth fund and XLC is a SPDR State Street Global Advisors Communications fund. So, what’s the difference between ARKK and XLC? And which fund is better?

The expense ratio of ARKK is 0.63 percentage points higher than XLC’s (0.75% vs. 0.12%). ARKK also has a higher exposure to the technology sector and a lower standard deviation. Overall, ARKK has provided higher returns than XLC over the past 2 years.

In this article, we’ll compare ARKK vs. XLC. We’ll look at portfolio growth and annual returns, as well as at their fund composition and performance. Moreover, I’ll also discuss ARKK’s and XLC’s industry exposure, holdings, and risk metrics and examine how these affect their overall returns.

Summary

ARKK XLC
Name ARK Innovation ETF Communication Services Select Sector SPDR Fund
Category Mid-Cap Growth Communications
Issuer ARK ETF Trust SPDR State Street Global Advisors
AUM 25.52B 14.09B
Avg. Return 55.45% 29.04%
Div. Yield 0.0% 0.62%
Expense Ratio 0.75% 0.12%

The ARK Innovation ETF (ARKK) is a Mid-Cap Growth fund that is issued by ARK ETF Trust. It currently has 25.52B total assets under management and has yielded an average annual return of 55.45% over the past 10 years. The fund has a dividend yield of 0.0% with an expense ratio of 0.75%.

The Communication Services Select Sector SPDR Fund (XLC) is a Communications fund that is issued by SPDR State Street Global Advisors. It currently has 14.09B total assets under management and has yielded an average annual return of 29.04% over the past 10 years. The fund has a dividend yield of 0.62% with an expense ratio of 0.12%.

ARKK’s dividend yield is 0.62% lower than that of XLC (0.0% vs. 0.62%). Also, ARKK yielded on average 26.42% more per year over the past decade (55.45% vs. 29.04%). The expense ratio of ARKK is 0.63 percentage points higher than XLC’s (0.75% vs. 0.12%).

FYI: The best way I've found to invest in ETFs is through M1 Finance. It's free and you even get an instant line of credit! Have a look here (link to M1 Finance).

Fund Composition

Industry Exposure

ARKK vs. XLC - Industry Exposure

ARKK XLC
Technology 30.5% 0.0%
Industrials 2.11% 0.0%
Energy 0.0% 0.0%
Communication Services 25.01% 100.0%
Utilities 0.0% 0.0%
Healthcare 29.47% 0.0%
Consumer Defensive 0.93% 0.0%
Real Estate 0.51% 0.0%
Financial Services 0.04% 0.0%
Consumer Cyclical 11.42% 0.0%
Basic Materials 0.0% 0.0%

The ARK Innovation ETF (ARKK) has the most exposure to the Technology sector at 30.5%. This is followed by Healthcare and Communication Services at 29.47% and 25.01% respectively. Utilities (0.0%), Energy (0.0%), and Financial Services (0.04%) only make up 0.04% of the fund’s total assets.

ARKK’s mid-section with moderate exposure is comprised of Real Estate, Consumer Defensive, Industrials, Consumer Cyclical, and Communication Services stocks at 0.51%, 0.93%, 2.11%, 11.42%, and 25.01%.

The Communication Services Select Sector SPDR Fund (XLC) has the most exposure to the Communication Services sector at 100.0%. This is followed by Technology and Industrials at 0.0% and 0.0% respectively. Consumer Cyclical (0.0%), Financial Services (0.0%), and Real Estate (0.0%) only make up 0.00% of the fund’s total assets.

XLC’s mid-section with moderate exposure is comprised of Consumer Defensive, Healthcare, Utilities, Energy, and Industrials stocks at 0.0%, 0.0%, 0.0%, 0.0%, and 0.0%.

ARKK is 30.50% more exposed to the Technology sector than XLC (30.5% vs 0.0%). ARKK’s exposure to Healthcare and Communication Services stocks is 29.47% higher and 74.99% lower respectively (29.47% vs. 0.0% and 25.01% vs. 100.0%). In total, Utilities, Energy, and Financial Services also make up 0.04% more of the fund’s holdings compared to XLC (0.04% vs. 0.00%).

Holdings

ARKK - Holdings

ARKK Holdings Weight
Tesla Inc 9.56%
Roku Inc Class A 6.48%
Teladoc Health Inc 5.76%
Square Inc A 4.37%
Zoom Video Communications Inc 4.36%
Shopify Inc A 4.27%
Spotify Technology SA 3.68%
Twilio Inc A 3.66%
Coinbase Global Inc Ordinary Shares – Class A 3.65%
Unity Software Inc Ordinary Shares 3.41%

ARKK’s Top Holdings are Tesla Inc, Roku Inc Class A, Teladoc Health Inc, Square Inc A, and Zoom Video Communications Inc at 9.56%, 6.48%, 5.76%, 4.37%, and 4.36%.

Shopify Inc A (4.27%), Spotify Technology SA (3.68%), and Twilio Inc A (3.66%) have a slightly smaller but still significant weight. Coinbase Global Inc Ordinary Shares – Class A and Unity Software Inc Ordinary Shares are also represented in the ARKK’s holdings at 3.65% and 3.41%.

XLC - Holdings

XLC Holdings Weight
Facebook Inc A 23.75%
Alphabet Inc A 11.49%
Alphabet Inc Class C 11.16%
Netflix Inc 4.78%
Charter Communications Inc A 4.65%
Comcast Corp Class A 4.44%
T-Mobile US Inc 4.41%
The Walt Disney Co 4.39%
AT&T Inc 4.35%
Verizon Communications Inc 4.33%

XLC’s Top Holdings are Facebook Inc A, Alphabet Inc A, Alphabet Inc Class C, Netflix Inc, and Charter Communications Inc A at 23.75%, 11.49%, 11.16%, 4.78%, and 4.65%.

Comcast Corp Class A (4.44%), T-Mobile US Inc (4.41%), and The Walt Disney Co (4.39%) have a slightly smaller but still significant weight. AT&T Inc and Verizon Communications Inc are also represented in the XLC’s holdings at 4.35% and 4.33%.

NOTE: The easiest way to add diversification to your portfolio is to invest in real estate through Fundrise. You can become private real estate investor without the burden of property management! Check it out here (link to Fundrise).

Risk Analysis

ARKK XLC
Mean Return 0 0
R-squared 0 0
Std. Deviation 0 0
Alpha 0 0
Beta 0 0
Sharpe Ratio 0 0
Treynor Ratio 0 0

The ARK Innovation ETF (ARKK) has a Standard Deviation of 0 with a Treynor Ratio of 0 and a Alpha of 0. Its R-squared is 0 while ARKK’s Sharpe Ratio is 0. Furthermore, the fund has a Mean Return of 0 and a Beta of 0.

The Communication Services Select Sector SPDR Fund (XLC) has a Sharpe Ratio of 0 with a Beta of 0 and a R-squared of 0. Its Alpha is 0 while XLC’s Standard Deviation is 0. Furthermore, the fund has a Mean Return of 0 and a Treynor Ratio of 0.

ARKK’s Mean Return is 0.00 points lower than that of XLC and its R-squared is 0.00 points lower. With a Standard Deviation of 0, ARKK is slightly less volatile than XLC. The Alpha and Beta of ARKK are 0.00 points lower and 0.00 points lower than XLC’s Alpha and Beta.

BTW: Uncorrelated crypto assets such as Bitcoin can serve as a hedge and mitigate risk. I've allocated around 5% of my portfolio to crypto assets through Coinbase - the simplest and cheapest broker I've found! Click here to read more (link to Coinbase).

Performance

Annual Returns

ARKK vs. XLC - Annual Returns

Year ARKK XLC
2020 152.52% 26.85%
2019 35.73% 31.22%
2018 3.58% 0.0%
2017 87.38% 0.0%
2016 -1.96% 0.0%
2015 3.76% 0.0%
2014 0.0% 0.0%
2013 0.0% 0.0%
2012 0.0% 0.0%
2011 0.0% 0.0%
2010 0.0% 0.0%

ARKK had its best year in 2020 with an annual return of 152.52%. ARKK’s worst year over the past decade yielded -1.96% and occurred in 2016. In most years the ARK Innovation ETF provided moderate returns such as in 2011, 2010, and 2018 where annual returns amounted to 0.0%, 0.0%, and 3.58% respectively.

The year 2019 was the strongest year for XLC, returning 31.22% on an annual basis. The poorest year for XLC in the last ten years was 2018, with a yield of 0.0%. Most years the Communication Services Select Sector SPDR Fund has given investors modest returns, such as in 2014, 2013, and 2012, when gains were 0.0%, 0.0%, and 0.0% respectively.

Portfolio Growth

ARKK vs. XLC - Portfolio Growth

Fund Initial Balance Final Balance CAGR
ARKK $10,000 $34,274 55.45%
XLC $10,000 $16,645 29.04%

A $10,000 investment in ARKK would have resulted in a final balance of $34,274. This is a profit of $24,274 over 2 years and amounts to a compound annual growth rate (CAGR) of 55.45%.

With a $10,000 investment in XLC, the end total would have been $16,645. This equates to a $6,645 profit over 2 years and a compound annual growth rate (CAGR) of 29.04%.

ARKK’s CAGR is 26.42 percentage points higher than that of XLC and as a result, would have yielded $17,629 more on a $10,000 investment. Thus, ARKK outperformed XLC by 26.42% annually.


Current recommendations:

Over the past years, I have discovered several tools and products that have helped me tremendously on my path to financial freedom:

P.S.: The links below are affiliate links, which means I receive a small commission at no extra cost to you when you sign up for one of the services. Thank you for your support!

1) Take a look at M1 Finance, my favorite broker. I love how easy it is to invest and maintain my portfolio with them. I can set up automatic transfers, rebalance my portfolio with one click and even borrow up to 35% of my assets at super low interest rates!

2) Fundrise is by far the best way I've found to invest in Real Estate. You can diversify your portfolio by investing in their eREITs or even allocate capital to individual properties (without the hassle of managing tenants!).

3) If you are interested in crypto, check out Coinbase. I've started allocating a small amount of assets to the growing crypto space and Coinbase has just been a breeze to use. Once you register, make sure to also open an Coinbase Pro account to buy crypto at the lowest fees on the market (just 0.1%!).

To see all of my most up-to-date recommendations, check out the Recommended Tools section.

Leave a Reply