The iShares MSCI Emerging Markets ETF (EEM) and the Health Care Select Sector SPDR Fund (XLV) are both among the Top 100 ETFs. EEM is a iShares Diversified Emerging Mkts fund and XLV is a SPDR State Street Global Advisors Health fund. So, what’s the difference between EEM and XLV? And which fund is better?
The expense ratio of EEM is 0.56 percentage points higher than XLV’s (0.68% vs. 0.12%). EEM also has a higher exposure to the technology sector and a higher standard deviation. Overall, EEM has provided lower returns than XLV over the past ten years.
In this article, we’ll compare EEM vs. XLV. We’ll look at annual returns and risk metrics, as well as at their portfolio growth and fund composition. Moreover, I’ll also discuss EEM’s and XLV’s holdings, performance, and industry exposure and examine how these affect their overall returns.
|Name||iShares MSCI Emerging Markets ETF||Health Care Select Sector SPDR Fund|
|Category||Diversified Emerging Mkts||Health|
|Issuer||iShares||SPDR State Street Global Advisors|
The iShares MSCI Emerging Markets ETF (EEM) is a Diversified Emerging Mkts fund that is issued by iShares. It currently has 30.33B total assets under management and has yielded an average annual return of 5.47% over the past 10 years. The fund has a dividend yield of 1.48% with an expense ratio of 0.68%.
The Health Care Select Sector SPDR Fund (XLV) is a Health fund that is issued by SPDR State Street Global Advisors. It currently has 27.88B total assets under management and has yielded an average annual return of 15.02% over the past 10 years. The fund has a dividend yield of 1.4% with an expense ratio of 0.12%.
EEM’s dividend yield is 0.08% higher than that of XLV (1.48% vs. 1.4%). Also, EEM yielded on average 9.55% less per year over the past decade (5.47% vs. 15.02%). The expense ratio of EEM is 0.56 percentage points higher than XLV’s (0.68% vs. 0.12%).
The iShares MSCI Emerging Markets ETF (EEM) has the most exposure to the Technology sector at 21.36%. This is followed by Financial Services and Consumer Cyclical at 18.39% and 15.16% respectively. Utilities (1.99%), Industrials (4.61%), and Healthcare (5.06%) only make up 11.66% of the fund’s total assets.
EEM’s mid-section with moderate exposure is comprised of Energy, Consumer Defensive, Basic Materials, Communication Services, and Consumer Cyclical stocks at 5.17%, 5.45%, 9.07%, 11.76%, and 15.16%.
The Health Care Select Sector SPDR Fund (XLV) has the most exposure to the Healthcare 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.
XLV’s mid-section with moderate exposure is comprised of Consumer Defensive, Utilities, Communication Services, Energy, and Industrials stocks at 0.0%, 0.0%, 0.0%, 0.0%, and 0.0%.
EEM is 21.36% more exposed to the Technology sector than XLV (21.36% vs 0.0%). EEM’s exposure to Financial Services and Consumer Cyclical stocks is 18.39% higher and 15.16% higher respectively (18.39% vs. 0.0% and 15.16% vs. 0.0%). In total, Utilities, Industrials, and Healthcare also make up 88.34% less of the fund’s holdings compared to XLV (11.66% vs. 100.00%).
|Taiwan Semiconductor Manufacturing Co Ltd||6.36%|
|Alibaba Group Holding Ltd Ordinary Shares||4.58%|
|Tencent Holdings Ltd||4.41%|
|Samsung Electronics Co Ltd||4.05%|
|Naspers Ltd Class N||1.04%|
|Reliance Industries Ltd Shs Dematerialised||0.97%|
|China Construction Bank Corp Class H||0.83%|
EEM’s Top Holdings are Taiwan Semiconductor Manufacturing Co Ltd, Alibaba Group Holding Ltd Ordinary Shares, Tencent Holdings Ltd, Samsung Electronics Co Ltd, and Meituan at 6.36%, 4.58%, 4.41%, 4.05%, and 1.24%.
Vale SA (1.04%), Naspers Ltd Class N (1.04%), and Reliance Industries Ltd Shs Dematerialised (0.97%) have a slightly smaller but still significant weight. Infosys Ltd and China Construction Bank Corp Class H are also represented in the EEM’s holdings at 0.92% and 0.83%.
|Johnson & Johnson||9.19%|
|UnitedHealth Group Inc||8.01%|
|Thermo Fisher Scientific Inc||4.2%|
|Merck & Co Inc||4.17%|
|Eli Lilly and Co||3.87%|
XLV’s Top Holdings are Johnson & Johnson, UnitedHealth Group Inc, Pfizer Inc, Abbott Laboratories, and AbbVie Inc at 9.19%, 8.01%, 4.64%, 4.36%, and 4.21%.
Thermo Fisher Scientific Inc (4.2%), Merck & Co Inc (4.17%), and Eli Lilly and Co (3.87%) have a slightly smaller but still significant weight. Danaher Corp and Medtronic PLC are also represented in the XLV’s holdings at 3.61% and 3.54%.
The iShares MSCI Emerging Markets ETF (EEM) has a Mean Return of 0.38 with a Alpha of -2.33 and a R-squared of 83.5. Its Standard Deviation is 17.79 while EEM’s Sharpe Ratio is 0.22. Furthermore, the fund has a Treynor Ratio of 2.22 and a Beta of 1.08.
The Health Care Select Sector SPDR Fund (XLV) has a Treynor Ratio of 21.1 with a R-squared of 58.19 and a Mean Return of 1.27. Its Standard Deviation is 12.94 while XLV’s Sharpe Ratio is 1.13. Furthermore, the fund has a Beta of 0.7 and a Alpha of 7.75.
EEM’s Mean Return is 0.89 points lower than that of XLV and its R-squared is 25.31 points higher. With a Standard Deviation of 17.79, EEM is slightly more volatile than XLV. The Alpha and Beta of EEM are 10.08 points lower and 0.38 points higher than XLV’s Alpha and Beta.
EEM had its best year in 2017 with an annual return of 36.42%. EEM’s worst year over the past decade yielded -18.87% and occurred in 2011. In most years the iShares MSCI Emerging Markets ETF provided moderate returns such as in 2014, 2016, and 2010 where annual returns amounted to -2.82%, 10.51%, and 15.93% respectively.
The year 2013 was the strongest year for XLV, returning 41.24% on an annual basis. The poorest year for XLV in the last ten years was 2016, with a yield of -2.83%. Most years the Health Care Select Sector SPDR Fund has given investors modest returns, such as in 2011, 2020, and 2012, when gains were 12.44%, 13.33%, and 17.56% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in EEM would have resulted in a final balance of $15,578. This is a profit of $5,578 over 11 years and amounts to a compound annual growth rate (CAGR) of 5.47%.
With a $10,000 investment in XLV, the end total would have been $44,147. This equates to a $34,147 profit over 11 years and a compound annual growth rate (CAGR) of 15.02%.
EEM’s CAGR is 9.55 percentage points lower than that of XLV and as a result, would have yielded $28,569 less on a $10,000 investment. Thus, EEM performed worse than XLV by 9.55% annually.
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