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ARKK vs. XLI: What’s The Difference?

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

The expense ratio of ARKK is 0.63 percentage points higher than XLI’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 XLI over the past 5 years.

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

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Summary

ARKKXLI
NameARK Innovation ETFIndustrial Select Sector SPDR Fund
CategoryMid-Cap GrowthIndustrials
IssuerARK ETF TrustSPDR State Street Global Advisors
AUM25.52B19.33B
Avg. Return55.45%14.44%
Div. Yield0.0%1.25%
Expense Ratio0.75%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 Industrial Select Sector SPDR Fund (XLI) is a Industrials fund that is issued by SPDR State Street Global Advisors. It currently has 19.33B total assets under management and has yielded an average annual return of 14.44% over the past 10 years. The fund has a dividend yield of 1.25% with an expense ratio of 0.12%.

ARKK’s dividend yield is 1.25% lower than that of XLI (0.0% vs. 1.25%). Also, ARKK yielded on average 41.01% more per year over the past decade (55.45% vs. 14.44%). The expense ratio of ARKK is 0.63 percentage points higher than XLI’s (0.75% vs. 0.12%).

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Fund Composition

Industry Exposure

ARKK vs. XLI - Industry Exposure

ARKKXLI
Technology30.5%1.82%
Industrials2.11%97.49%
Energy0.0%0.0%
Communication Services25.01%0.0%
Utilities0.0%0.0%
Healthcare29.47%0.0%
Consumer Defensive0.93%0.0%
Real Estate0.51%0.0%
Financial Services0.04%0.0%
Consumer Cyclical11.42%0.69%
Basic Materials0.0%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 Industrial Select Sector SPDR Fund (XLI) has the most exposure to the Industrials sector at 97.49%. This is followed by Technology and Consumer Cyclical at 1.82% and 0.69% respectively. Financial Services (0.0%), Real Estate (0.0%), and Consumer Defensive (0.0%) only make up 0.00% of the fund’s total assets.

XLI’s mid-section with moderate exposure is comprised of Healthcare, Utilities, Communication Services, Energy, and Consumer Cyclical stocks at 0.0%, 0.0%, 0.0%, 0.0%, and 0.69%.

ARKK is 28.68% more exposed to the Technology sector than XLI (30.5% vs 1.82%). ARKK’s exposure to Healthcare and Communication Services stocks is 29.47% higher and 25.01% higher respectively (29.47% vs. 0.0% and 25.01% vs. 0.0%). In total, Utilities, Energy, and Financial Services also make up 0.04% more of the fund’s holdings compared to XLI (0.04% vs. 0.00%).

Holdings

ARKK - Holdings

ARKK HoldingsWeight
Tesla Inc9.56%
Roku Inc Class A6.48%
Teladoc Health Inc5.76%
Square Inc A4.37%
Zoom Video Communications Inc4.36%
Shopify Inc A4.27%
Spotify Technology SA3.68%
Twilio Inc A3.66%
Coinbase Global Inc Ordinary Shares – Class A3.65%
Unity Software Inc Ordinary Shares3.41%

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%.

XLI - Holdings

XLI HoldingsWeight
Honeywell International Inc4.9%
United Parcel Service Inc Class B4.84%
Union Pacific Corp4.7%
Boeing Co4.24%
Raytheon Technologies Corp4.16%
Caterpillar Inc3.84%
General Electric Co3.8%
3M Co3.7%
Deere & Co3.54%
Lockheed Martin Corp2.98%

XLI’s Top Holdings are Honeywell International Inc, United Parcel Service Inc Class B, Union Pacific Corp, Boeing Co, and Raytheon Technologies Corp at 4.9%, 4.84%, 4.7%, 4.24%, and 4.16%.

Caterpillar Inc (3.84%), General Electric Co (3.8%), and 3M Co (3.7%) have a slightly smaller but still significant weight. Deere & Co and Lockheed Martin Corp are also represented in the XLI’s holdings at 3.54% and 2.98%.

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Risk Analysis

ARKKXLI
Mean Return01.14
R-squared078.97
Std. Deviation017.13
Alpha02.38
Beta01.08
Sharpe Ratio00.76
Treynor Ratio011.34

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

The Industrial Select Sector SPDR Fund (XLI) has a R-squared of 78.97 with a Alpha of 2.38 and a Standard Deviation of 17.13. Its Treynor Ratio is 11.34 while XLI’s Beta is 1.08. Furthermore, the fund has a Sharpe Ratio of 0.76 and a Mean Return of 1.14.

ARKK’s Mean Return is 1.14 points lower than that of XLI and its R-squared is 78.97 points lower. With a Standard Deviation of 0, ARKK is slightly less volatile than XLI. The Alpha and Beta of ARKK are 2.38 points lower and 1.08 points lower than XLI’s Alpha and Beta.

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Performance

Annual Returns

ARKK vs. XLI - Annual Returns

YearARKKXLI
2020152.52%11.0%
201935.73%29.11%
20183.58%-13.1%
201787.38%23.85%
2016-1.96%19.93%
20153.76%-4.27%
20140.0%10.44%
20130.0%40.44%
20120.0%14.86%
20110.0%-1.01%
20100.0%27.62%

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 2013 was the strongest year for XLI, returning 40.44% on an annual basis. The poorest year for XLI in the last ten years was 2018, with a yield of -13.1%. Most years the Industrial Select Sector SPDR Fund has given investors modest returns, such as in 2020, 2012, and 2016, when gains were 11.0%, 14.86%, and 19.93% respectively.

Portfolio Growth

ARKK vs. XLI - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
ARKK$10,000$65,21855.45%
XLI$10,000$18,49814.44%

A $10,000 investment in ARKK would have resulted in a final balance of $65,218. This is a profit of $55,218 over 5 years and amounts to a compound annual growth rate (CAGR) of 55.45%.

With a $10,000 investment in XLI, the end total would have been $18,498. This equates to a $8,498 profit over 5 years and a compound annual growth rate (CAGR) of 14.44%.

ARKK’s CAGR is 41.01 percentage points higher than that of XLI and as a result, would have yielded $46,720 more on a $10,000 investment. Thus, ARKK outperformed XLI by 41.01% annually.


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