Skip to content

IEMG vs. XLK: What’s The Difference?

The iShares Core MSCI Emerging Markets ETF (IEMG) and the Technology Select Sector SPDR Fund (XLK) are both among the Top 100 ETFs. IEMG is a iShares Diversified Emerging Mkts fund and XLK is a SPDR State Street Global Advisors Technology fund. So, what’s the difference between IEMG and XLK? And which fund is better?

The expense ratio of IEMG is 0.01 percentage points lower than XLK’s (0.11% vs. 0.12%). IEMG also has a lower exposure to the technology sector and a lower standard deviation. Overall, IEMG has provided lower returns than XLK over the past ten years.

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

TIP: Keep track of all your investments with Personal Capital. I use this amazing tool to aggregate all investments in one place and make sure I'm on track to financial freedom. Oh, and did I mention it's free? Try it out here (link to Personal Capital).

Summary

IEMGXLK
NameiShares Core MSCI Emerging Markets ETFTechnology Select Sector SPDR Fund
CategoryDiversified Emerging MktsTechnology
IssueriSharesSPDR State Street Global Advisors
AUM83.68B42.3B
Avg. Return7.41%20.02%
Div. Yield1.78%0.73%
Expense Ratio0.11%0.12%

The iShares Core MSCI Emerging Markets ETF (IEMG) is a Diversified Emerging Mkts fund that is issued by iShares. It currently has 83.68B total assets under management and has yielded an average annual return of 7.41% over the past 10 years. The fund has a dividend yield of 1.78% with an expense ratio of 0.11%.

The Technology Select Sector SPDR Fund (XLK) is a Technology fund that is issued by SPDR State Street Global Advisors. It currently has 42.3B total assets under management and has yielded an average annual return of 20.02% over the past 10 years. The fund has a dividend yield of 0.73% with an expense ratio of 0.12%.

IEMG’s dividend yield is 1.05% higher than that of XLK (1.78% vs. 0.73%). Also, IEMG yielded on average 12.62% less per year over the past decade (7.41% vs. 20.02%). The expense ratio of IEMG is 0.01 percentage points lower than XLK’s (0.11% 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

IEMG vs. XLK - Industry Exposure

IEMGXLK
Technology20.44%87.54%
Industrials5.92%1.75%
Energy4.71%0.0%
Communication Services11.41%0.0%
Utilities2.13%0.0%
Healthcare5.73%0.0%
Consumer Defensive5.68%0.0%
Real Estate2.75%0.0%
Financial Services16.9%10.71%
Consumer Cyclical15.67%0.0%
Basic Materials8.64%0.0%

The iShares Core MSCI Emerging Markets ETF (IEMG) has the most exposure to the Technology sector at 20.44%. This is followed by Financial Services and Consumer Cyclical at 16.9% and 15.67% respectively. Real Estate (2.75%), Energy (4.71%), and Consumer Defensive (5.68%) only make up 13.14% of the fund’s total assets.

IEMG’s mid-section with moderate exposure is comprised of Healthcare, Industrials, Basic Materials, Communication Services, and Consumer Cyclical stocks at 5.73%, 5.92%, 8.64%, 11.41%, and 15.67%.

The Technology Select Sector SPDR Fund (XLK) has the most exposure to the Technology sector at 87.54%. This is followed by Financial Services and Industrials at 10.71% and 1.75% respectively. Consumer Cyclical (0.0%), Real Estate (0.0%), and Consumer Defensive (0.0%) only make up 0.00% of the fund’s total assets.

XLK’s mid-section with moderate exposure is comprised of Healthcare, Utilities, Communication Services, Energy, and Industrials stocks at 0.0%, 0.0%, 0.0%, 0.0%, and 1.75%.

IEMG is 67.10% less exposed to the Technology sector than XLK (20.44% vs 87.54%). IEMG’s exposure to Financial Services and Consumer Cyclical stocks is 6.19% higher and 15.67% higher respectively (16.9% vs. 10.71% and 15.67% vs. 0.0%). In total, Real Estate, Energy, and Consumer Defensive also make up 13.14% more of the fund’s holdings compared to XLK (13.14% vs. 0.00%).

Holdings

IEMG - Holdings

IEMG HoldingsWeight
Taiwan Semiconductor Manufacturing Co Ltd5.37%
Tencent Holdings Ltd4.42%
Alibaba Group Holding Ltd Ordinary Shares4.38%
Samsung Electronics Co Ltd3.49%
Meituan1.52%
Naspers Ltd Class N0.93%
Vale SA0.91%
Reliance Industries Ltd Shs Dematerialised0.83%
China Construction Bank Corp Class H0.77%
Infosys Ltd0.74%

IEMG’s Top Holdings are Taiwan Semiconductor Manufacturing Co Ltd, Tencent Holdings Ltd, Alibaba Group Holding Ltd Ordinary Shares, Samsung Electronics Co Ltd, and Meituan at 5.37%, 4.42%, 4.38%, 3.49%, and 1.52%.

Naspers Ltd Class N (0.93%), Vale SA (0.91%), and Reliance Industries Ltd Shs Dematerialised (0.83%) have a slightly smaller but still significant weight. China Construction Bank Corp Class H and Infosys Ltd are also represented in the IEMG’s holdings at 0.77% and 0.74%.

XLK - Holdings

XLK HoldingsWeight
Apple Inc21.45%
Microsoft Corp20.37%
NVIDIA Corp4.98%
Visa Inc Class A3.95%
PayPal Holdings Inc3.42%
Mastercard Inc A3.19%
Adobe Inc2.8%
Salesforce.com Inc2.26%
Intel Corp2.26%
Cisco Systems Inc2.23%

XLK’s Top Holdings are Apple Inc, Microsoft Corp, NVIDIA Corp, Visa Inc Class A, and PayPal Holdings Inc at 21.45%, 20.37%, 4.98%, 3.95%, and 3.42%.

Mastercard Inc A (3.19%), Adobe Inc (2.8%), and Salesforce.com Inc (2.26%) have a slightly smaller but still significant weight. Intel Corp and Cisco Systems Inc are also represented in the XLK’s holdings at 2.26% and 2.23%.

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

IEMGXLK
Mean Return01.7
R-squared073.56
Std. Deviation015.58
Alpha010.43
Beta00.95
Sharpe Ratio01.27
Treynor Ratio021.44

The iShares Core MSCI Emerging Markets ETF (IEMG) has a Treynor Ratio of 0 with a Alpha of 0 and a Mean Return of 0. Its Beta is 0 while IEMG’s Standard Deviation is 0. Furthermore, the fund has a Sharpe Ratio of 0 and a R-squared of 0.

The Technology Select Sector SPDR Fund (XLK) has a Treynor Ratio of 21.44 with a Sharpe Ratio of 1.27 and a R-squared of 73.56. Its Standard Deviation is 15.58 while XLK’s Alpha is 10.43. Furthermore, the fund has a Mean Return of 1.7 and a Beta of 0.95.

IEMG’s Mean Return is 1.70 points lower than that of XLK and its R-squared is 73.56 points lower. With a Standard Deviation of 0, IEMG is slightly less volatile than XLK. The Alpha and Beta of IEMG are 10.43 points lower and 0.95 points lower than XLK’s Alpha and Beta.

FYI: Another great way to get exposure to the real estate sector is by investing in real estate debt. Groundfloor offers fantastic short-term, high-yield bonds that can add diversification to your portfolio!

Performance

Annual Returns

IEMG vs. XLK - Annual Returns

YearIEMGXLK
202018.18%43.67%
201917.5%49.97%
2018-14.69%-1.56%
201736.78%34.27%
20169.98%14.81%
2015-13.86%5.62%
2014-2.04%17.75%
2013-2.16%25.98%
20120.0%15.47%
20110.0%2.69%
20100.0%11.6%

IEMG had its best year in 2017 with an annual return of 36.78%. IEMG’s worst year over the past decade yielded -14.69% and occurred in 2018. In most years the iShares Core MSCI Emerging Markets ETF provided moderate returns such as in 2012, 2011, and 2010 where annual returns amounted to 0.0%, 0.0%, and 0.0% respectively.

The year 2019 was the strongest year for XLK, returning 49.97% on an annual basis. The poorest year for XLK in the last ten years was 2018, with a yield of -1.56%. Most years the Technology Select Sector SPDR Fund has given investors modest returns, such as in 2016, 2012, and 2014, when gains were 14.81%, 15.47%, and 17.75% respectively.

Portfolio Growth

IEMG vs. XLK - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
IEMG$10,000$15,0377.41%
XLK$10,000$40,66320.02%

A $10,000 investment in IEMG would have resulted in a final balance of $15,037. This is a profit of $5,037 over 7 years and amounts to a compound annual growth rate (CAGR) of 7.41%.

With a $10,000 investment in XLK, the end total would have been $40,663. This equates to a $30,663 profit over 7 years and a compound annual growth rate (CAGR) of 20.02%.

IEMG’s CAGR is 12.62 percentage points lower than that of XLK and as a result, would have yielded $25,626 less on a $10,000 investment. Thus, IEMG performed worse than XLK by 12.62% 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)Personal Capital is simply the best tool out there to track your net worth and plan for financial freedom. Just their retirement planner alone has become an invaluable tool to keep myself on track financially. Try it out, it's free!

2) 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!

3) 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!).

4) Groundfloor is another great way to get exposure to the real estate sector by investing in short-term, high-yield real estate debt. Current returns are >10% and you can get started with just $10.

5) If you are interested in startup investing, check out Mainvest. I've started allocating a small amount of assets to invest in and support small businesses. Return targets are between 10-25% and you can start with just $100!

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

Leave a Reply

Your email address will not be published. Required fields are marked *