GOVT vs. XLC: What’s The Difference?

The iShares U.S. Treasury Bond ETF (GOVT) and the Communication Services Select Sector SPDR Fund (XLC) are both among the Top 100 ETFs. GOVT is a iShares Intermediate Government fund and XLC is a SPDR State Street Global Advisors Communications fund. So, what’s the difference between GOVT and XLC? And which fund is better?

The expense ratio of GOVT is 0.07 percentage points lower than XLC’s (0.05% vs. 0.12%). GOVT is mostly comprised of AAA bonds while XLC has a high exposure to the communication services sector. Overall, GOVT has provided lower returns than XLC over the past 2 years.

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

Summary

GOVT XLC
Name iShares U.S. Treasury Bond ETF Communication Services Select Sector SPDR Fund
Category Intermediate Government Communications
Issuer iShares SPDR State Street Global Advisors
AUM 17.07B 14.09B
Avg. Return 2.67% 29.04%
Div. Yield 1.0% 0.62%
Expense Ratio 0.05% 0.12%

The iShares U.S. Treasury Bond ETF (GOVT) is a Intermediate Government fund that is issued by iShares. It currently has 17.07B total assets under management and has yielded an average annual return of 2.67% over the past 10 years. The fund has a dividend yield of 1.0% with an expense ratio of 0.05%.

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%.

GOVT’s dividend yield is 0.38% higher than that of XLC (1.0% vs. 0.62%). Also, GOVT yielded on average 26.36% less per year over the past decade (2.67% vs. 29.04%). The expense ratio of GOVT is 0.07 percentage points lower than XLC’s (0.05% vs. 0.12%).

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Fund Composition

Holdings

GOVT - Holdings

GOVT Bond Sectors Weight
AAA 100.0%
Others 0.0%
Below B 0.0%
B 0.0%
BB 0.0%
BBB 0.0%
A 0.0%
AA 0.0%
US Government 0.0%

GOVT’s Top Bond Sectors are ratings of AAA, Others, Below B, B, and BB at 100.0%, 0.0%, 0.0%, 0.0%, and 0.0%. The fund is less weighted towards BBB (0.0%), A (0.0%), and AA (0.0%) rated bonds.

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%.

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Risk Analysis

GOVT 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 iShares U.S. Treasury Bond ETF (GOVT) has a R-squared of 0 with a Alpha of 0 and a Standard Deviation of 0. Its Treynor Ratio is 0 while GOVT’s Beta is 0. Furthermore, the fund has a Mean Return of 0 and a Sharpe Ratio of 0.

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

GOVT’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, GOVT is slightly less volatile than XLC. The Alpha and Beta of GOVT are 0.00 points lower and 0.00 points lower than XLC’s Alpha and Beta.

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Performance

Annual Returns

GOVT vs. XLC - Annual Returns

Year GOVT XLC
2020 7.92% 26.85%
2019 6.71% 31.22%
2018 0.74% 0.0%
2017 2.19% 0.0%
2016 0.92% 0.0%
2015 0.76% 0.0%
2014 4.99% 0.0%
2013 -2.84% 0.0%
2012 0.0% 0.0%
2011 0.0% 0.0%
2010 0.0% 0.0%

GOVT had its best year in 2020 with an annual return of 7.92%. GOVT’s worst year over the past decade yielded -2.84% and occurred in 2013. In most years the iShares U.S. Treasury Bond ETF provided moderate returns such as in 2018, 2015, and 2016 where annual returns amounted to 0.74%, 0.76%, and 0.92% 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

GOVT vs. XLC - Portfolio Growth

Fund Initial Balance Final Balance CAGR
GOVT $10,000 $11,516 2.67%
XLC $10,000 $16,645 29.04%

A $10,000 investment in GOVT would have resulted in a final balance of $11,516. This is a profit of $1,516 over 2 years and amounts to a compound annual growth rate (CAGR) of 2.67%.

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%.

GOVT’s CAGR is 26.36 percentage points lower than that of XLC and as a result, would have yielded $5,129 less on a $10,000 investment. Thus, GOVT performed worse than XLC by 26.36% annually.


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