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IJR vs. XLF: What’s The Difference?

The iShares Core S&P Small-Cap ETF (IJR) and the Financial Select Sector SPDR Fund (XLF) are both among the Top 100 ETFs. IJR is a iShares Small Blend fund and XLF is a SPDR State Street Global Advisors Financial fund. So, what’s the difference between IJR and XLF? And which fund is better?

The expense ratio of IJR is 0.06 percentage points lower than XLF’s (0.06% vs. 0.12%). IJR also has a higher exposure to the industrials sector and a lower standard deviation. Overall, IJR has provided higher returns than XLF over the past ten years.

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

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Summary

IJRXLF
NameiShares Core S&P Small-Cap ETFFinancial Select Sector SPDR Fund
CategorySmall BlendFinancial
IssueriSharesSPDR State Street Global Advisors
AUM68.64B40.81B
Avg. Return13.97%12.17%
Div. Yield0.96%1.57%
Expense Ratio0.06%0.12%

The iShares Core S&P Small-Cap ETF (IJR) is a Small Blend fund that is issued by iShares. It currently has 68.64B total assets under management and has yielded an average annual return of 13.97% over the past 10 years. The fund has a dividend yield of 0.96% with an expense ratio of 0.06%.

The Financial Select Sector SPDR Fund (XLF) is a Financial fund that is issued by SPDR State Street Global Advisors. It currently has 40.81B total assets under management and has yielded an average annual return of 12.17% over the past 10 years. The fund has a dividend yield of 1.57% with an expense ratio of 0.12%.

IJR’s dividend yield is 0.61% lower than that of XLF (0.96% vs. 1.57%). Also, IJR yielded on average 1.80% more per year over the past decade (13.97% vs. 12.17%). The expense ratio of IJR is 0.06 percentage points lower than XLF’s (0.06% vs. 0.12%).

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Fund Composition

Industry Exposure

IJR vs. XLF - Industry Exposure

IJRXLF
Technology14.32%0.0%
Industrials17.31%0.0%
Energy4.0%0.0%
Communication Services2.59%0.0%
Utilities1.8%0.0%
Healthcare11.55%0.0%
Consumer Defensive4.01%0.0%
Real Estate9.55%0.0%
Financial Services15.91%100.0%
Consumer Cyclical13.61%0.0%
Basic Materials5.34%0.0%

The iShares Core S&P Small-Cap ETF (IJR) has the most exposure to the Industrials sector at 17.31%. This is followed by Financial Services and Technology at 15.91% and 14.32% respectively. Communication Services (2.59%), Energy (4.0%), and Consumer Defensive (4.01%) only make up 10.60% of the fund’s total assets.

IJR’s mid-section with moderate exposure is comprised of Basic Materials, Real Estate, Healthcare, Consumer Cyclical, and Technology stocks at 5.34%, 9.55%, 11.55%, 13.61%, and 14.32%.

The Financial Select Sector SPDR Fund (XLF) has the most exposure to the Financial Services sector at 100.0%. This is followed by Technology and Industrials at 0.0% and 0.0% 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.

XLF’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 0.0%.

IJR is 17.31% more exposed to the Industrials sector than XLF (17.31% vs 0.0%). IJR’s exposure to Financial Services and Technology stocks is 84.09% lower and 14.32% higher respectively (15.91% vs. 100.0% and 14.32% vs. 0.0%). In total, Communication Services, Energy, and Consumer Defensive also make up 10.60% more of the fund’s holdings compared to XLF (10.60% vs. 0.00%).

Holdings

IJR - Holdings

IJR HoldingsWeight
BlackRock Cash Funds Treasury SL Agency1.08%
GameStop Corp Class A0.86%
Omnicell Inc0.61%
Stamps.com Inc0.58%
Saia Inc0.57%
Power Integrations Inc0.57%
Exponent Inc0.54%
NeoGenomics Inc0.53%
Chart Industries Inc0.53%
Macy’s Inc0.51%

IJR’s Top Holdings are BlackRock Cash Funds Treasury SL Agency, GameStop Corp Class A, Omnicell Inc, Stamps.com Inc, and Saia Inc at 1.08%, 0.86%, 0.61%, 0.58%, and 0.57%.

Power Integrations Inc (0.57%), Exponent Inc (0.54%), and NeoGenomics Inc (0.53%) have a slightly smaller but still significant weight. Chart Industries Inc and Macy’s Inc are also represented in the IJR’s holdings at 0.53% and 0.51%.

XLF - Holdings

XLF HoldingsWeight
Berkshire Hathaway Inc Class B12.83%
JPMorgan Chase & Co11.47%
Bank of America Corp7.57%
Wells Fargo & Co4.56%
Citigroup Inc3.56%
Morgan Stanley3.32%
Goldman Sachs Group Inc3.15%
BlackRock Inc3.02%
Charles Schwab Corp2.66%
American Express Co2.62%

XLF’s Top Holdings are Berkshire Hathaway Inc Class B, JPMorgan Chase & Co, Bank of America Corp, Wells Fargo & Co, and Citigroup Inc at 12.83%, 11.47%, 7.57%, 4.56%, and 3.56%.

Morgan Stanley (3.32%), Goldman Sachs Group Inc (3.15%), and BlackRock Inc (3.02%) have a slightly smaller but still significant weight. Charles Schwab Corp and American Express Co are also represented in the XLF’s holdings at 2.66% and 2.62%.

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Risk Analysis

IJRXLF
Mean Return1.211.21
R-squared76.0373.26
Std. Deviation18.6818.86
Alpha-3.72.63
Beta1.21.15
Sharpe Ratio0.740.74
Treynor Ratio10.7711.25

The iShares Core S&P Small-Cap ETF (IJR) has a R-squared of 76.03 with a Standard Deviation of 18.68 and a Mean Return of 1.21. Its Alpha is -3.7 while IJR’s Sharpe Ratio is 0.74. Furthermore, the fund has a Beta of 1.2 and a Treynor Ratio of 10.77.

The Financial Select Sector SPDR Fund (XLF) has a Standard Deviation of 18.86 with a Beta of 1.15 and a Mean Return of 1.21. Its R-squared is 73.26 while XLF’s Sharpe Ratio is 0.74. Furthermore, the fund has a Treynor Ratio of 11.25 and a Alpha of 2.63.

IJR’s Mean Return is 0.00 points lower than that of XLF and its R-squared is 2.77 points higher. With a Standard Deviation of 18.68, IJR is slightly less volatile than XLF. The Alpha and Beta of IJR are 6.33 points lower and 0.05 points higher than XLF’s Alpha and Beta.

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Performance

Annual Returns

IJR vs. XLF - Annual Returns

YearIJRXLF
202011.24%-1.68%
201922.79%31.88%
2018-8.43%-13.09%
201713.2%22.03%
201626.49%22.55%
2015-2.0%-1.6%
20145.67%15.02%
201341.36%35.37%
201216.28%28.53%
20110.9%-17.16%
201026.14%11.97%

IJR had its best year in 2013 with an annual return of 41.36%. IJR’s worst year over the past decade yielded -8.43% and occurred in 2018. In most years the iShares Core S&P Small-Cap ETF provided moderate returns such as in 2020, 2017, and 2012 where annual returns amounted to 11.24%, 13.2%, and 16.28% respectively.

The year 2013 was the strongest year for XLF, returning 35.37% on an annual basis. The poorest year for XLF in the last ten years was 2011, with a yield of -17.16%. Most years the Financial Select Sector SPDR Fund has given investors modest returns, such as in 2010, 2014, and 2017, when gains were 11.97%, 15.02%, and 22.03% respectively.

Portfolio Growth

IJR vs. XLF - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
IJR$10,000$38,80013.97%
XLF$10,000$30,78212.17%

A $10,000 investment in IJR would have resulted in a final balance of $38,800. This is a profit of $28,800 over 11 years and amounts to a compound annual growth rate (CAGR) of 13.97%.

With a $10,000 investment in XLF, the end total would have been $30,782. This equates to a $20,782 profit over 11 years and a compound annual growth rate (CAGR) of 12.17%.

IJR’s CAGR is 1.80 percentage points higher than that of XLF and as a result, would have yielded $8,018 more on a $10,000 investment. Thus, IJR outperformed XLF by 1.80% annually.


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