IWB vs. XLC: What’s The Difference?

The iShares Russell 1000 ETF (IWB) and the Communication Services Select Sector SPDR Fund (XLC) are both among the Top 100 ETFs. IWB is a iShares Large Blend fund and XLC is a SPDR State Street Global Advisors Communications fund. So, what’s the difference between IWB and XLC? And which fund is better?

The expense ratio of IWB is 0.03 percentage points higher than XLC’s (0.15% vs. 0.12%). IWB also has a higher exposure to the technology sector and a higher standard deviation. Overall, IWB has provided lower returns than XLC over the past ten years.

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

Summary

IWB XLC
Name iShares Russell 1000 ETF Communication Services Select Sector SPDR Fund
Category Large Blend Communications
Issuer iShares SPDR State Street Global Advisors
AUM 30.54B 14.09B
Avg. Return 14.64% 29.04%
Div. Yield 1.14% 0.62%
Expense Ratio 0.15% 0.12%

The iShares Russell 1000 ETF (IWB) is a Large Blend fund that is issued by iShares. It currently has 30.54B total assets under management and has yielded an average annual return of 14.64% over the past 10 years. The fund has a dividend yield of 1.14% with an expense ratio of 0.15%.

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%.

IWB’s dividend yield is 0.52% higher than that of XLC (1.14% vs. 0.62%). Also, IWB yielded on average 14.40% less per year over the past decade (14.64% vs. 29.04%). The expense ratio of IWB is 0.03 percentage points higher than XLC’s (0.15% vs. 0.12%).

Fund Composition

Industry Exposure

IWB vs. XLC - Industry Exposure

IWB XLC
Technology 25.33% 0.0%
Industrials 8.88% 0.0%
Energy 2.44% 0.0%
Communication Services 10.83% 100.0%
Utilities 2.36% 0.0%
Healthcare 13.35% 0.0%
Consumer Defensive 5.97% 0.0%
Real Estate 3.34% 0.0%
Financial Services 13.64% 0.0%
Consumer Cyclical 11.85% 0.0%
Basic Materials 2.02% 0.0%

The iShares Russell 1000 ETF (IWB) has the most exposure to the Technology sector at 25.33%. This is followed by Financial Services and Healthcare at 13.64% and 13.35% respectively. Utilities (2.36%), Energy (2.44%), and Real Estate (3.34%) only make up 8.14% of the fund’s total assets.

IWB’s mid-section with moderate exposure is comprised of Consumer Defensive, Industrials, Communication Services, Consumer Cyclical, and Healthcare stocks at 5.97%, 8.88%, 10.83%, 11.85%, and 13.35%.

The Communication Services Select Sector SPDR Fund (XLC) has the most exposure to the Communication Services 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.

XLC’s mid-section with moderate exposure is comprised of Consumer Defensive, Healthcare, Utilities, Energy, and Industrials stocks at 0.0%, 0.0%, 0.0%, 0.0%, and 0.0%.

IWB is 25.33% more exposed to the Technology sector than XLC (25.33% vs 0.0%). IWB’s exposure to Financial Services and Healthcare stocks is 13.64% higher and 13.35% higher respectively (13.64% vs. 0.0% and 13.35% vs. 0.0%). In total, Utilities, Energy, and Real Estate also make up 8.14% more of the fund’s holdings compared to XLC (8.14% vs. 0.00%).

Holdings

IWB - Holdings

IWB Holdings Weight
Apple Inc 5.45%
Microsoft Corp 5.11%
Amazon.com Inc 3.43%
Facebook Inc Class A 2.03%
Alphabet Inc Class A 1.93%
Alphabet Inc Class C 1.82%
Tesla Inc 1.27%
Berkshire Hathaway Inc Class B 1.24%
NVIDIA Corp 1.11%
JPMorgan Chase & Co 1.09%

IWB’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc Class A, and Alphabet Inc Class A at 5.45%, 5.11%, 3.43%, 2.03%, and 1.93%.

Alphabet Inc Class C (1.82%), Tesla Inc (1.27%), and Berkshire Hathaway Inc Class B (1.24%) have a slightly smaller but still significant weight. NVIDIA Corp and JPMorgan Chase & Co are also represented in the IWB’s holdings at 1.11% and 1.09%.

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%.

Risk Analysis

IWB XLC
Mean Return 1.27 0
R-squared 99.73 0
Std. Deviation 13.87 0
Alpha -0.38 0
Beta 1.02 0
Sharpe Ratio 1.05 0
Treynor Ratio 14.31 0

The iShares Russell 1000 ETF (IWB) has a Standard Deviation of 13.87 with a Treynor Ratio of 14.31 and a R-squared of 99.73. Its Mean Return is 1.27 while IWB’s Sharpe Ratio is 1.05. Furthermore, the fund has a Beta of 1.02 and a Alpha of -0.38.

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

IWB’s Mean Return is 1.27 points higher than that of XLC and its R-squared is 99.73 points higher. With a Standard Deviation of 13.87, IWB is slightly more volatile than XLC. The Alpha and Beta of IWB are 0.38 points lower and 1.02 points higher than XLC’s Alpha and Beta.

Performance

Annual Returns

IWB vs. XLC - Annual Returns

Year IWB XLC
2020 20.8% 26.85%
2019 31.26% 31.22%
2018 -4.91% 0.0%
2017 21.53% 0.0%
2016 11.91% 0.0%
2015 0.82% 0.0%
2014 13.08% 0.0%
2013 32.93% 0.0%
2012 16.27% 0.0%
2011 1.36% 0.0%
2010 15.94% 0.0%

IWB had its best year in 2013 with an annual return of 32.93%. IWB’s worst year over the past decade yielded -4.91% and occurred in 2018. In most years the iShares Russell 1000 ETF provided moderate returns such as in 2014, 2010, and 2012 where annual returns amounted to 13.08%, 15.94%, and 16.27% 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

IWB vs. XLC - Portfolio Growth

Fund Initial Balance Final Balance CAGR
IWB $10,000 $15,856 14.64%
XLC $10,000 $16,645 29.04%

A $10,000 investment in IWB would have resulted in a final balance of $15,856. This is a profit of $5,856 over 2 years and amounts to a compound annual growth rate (CAGR) of 14.64%.

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%.

IWB’s CAGR is 14.40 percentage points lower than that of XLC and as a result, would have yielded $789 less on a $10,000 investment. Thus, IWB performed worse than XLC by 14.40% annually.


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