IWD vs. XLF: What’s The Difference?

The iShares Russell 1000 Value ETF (IWD) and the Financial Select Sector SPDR Fund (XLF) are both among the Top 100 ETFs. IWD is a iShares Large Value fund and XLF is a SPDR State Street Global Advisors Financial fund. So, what’s the difference between IWD and XLF? And which fund is better?

The expense ratio of IWD is 0.07 percentage points higher than XLF’s (0.19% vs. 0.12%). IWD also has a lower exposure to the financial services sector and a lower standard deviation. Overall, IWD has provided lower returns than XLF over the past ten years.

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

Summary

IWD XLF
Name iShares Russell 1000 Value ETF Financial Select Sector SPDR Fund
Category Large Value Financial
Issuer iShares SPDR State Street Global Advisors
AUM 54.1B 40.81B
Avg. Return 11.40% 12.17%
Div. Yield 1.57% 1.57%
Expense Ratio 0.19% 0.12%

The iShares Russell 1000 Value ETF (IWD) is a Large Value fund that is issued by iShares. It currently has 54.1B total assets under management and has yielded an average annual return of 11.40% over the past 10 years. The fund has a dividend yield of 1.57% with an expense ratio of 0.19%.

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%.

IWD’s dividend yield is 0.00% lower than that of XLF (1.57% vs. 1.57%). Also, IWD yielded on average 0.77% less per year over the past decade (11.40% vs. 12.17%). The expense ratio of IWD is 0.07 percentage points higher than XLF’s (0.19% vs. 0.12%).

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Fund Composition

Industry Exposure

IWD vs. XLF - Industry Exposure

IWD XLF
Technology 10.28% 0.0%
Industrials 11.77% 0.0%
Energy 4.76% 0.0%
Communication Services 8.67% 0.0%
Utilities 4.88% 0.0%
Healthcare 17.78% 0.0%
Consumer Defensive 7.76% 0.0%
Real Estate 4.94% 0.0%
Financial Services 20.43% 100.0%
Consumer Cyclical 5.62% 0.0%
Basic Materials 3.1% 0.0%

The iShares Russell 1000 Value ETF (IWD) has the most exposure to the Financial Services sector at 20.43%. This is followed by Healthcare and Industrials at 17.78% and 11.77% respectively. Energy (4.76%), Utilities (4.88%), and Real Estate (4.94%) only make up 14.58% of the fund’s total assets.

IWD’s mid-section with moderate exposure is comprised of Consumer Cyclical, Consumer Defensive, Communication Services, Technology, and Industrials stocks at 5.62%, 7.76%, 8.67%, 10.28%, and 11.77%.

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%.

IWD is 79.57% less exposed to the Financial Services sector than XLF (20.43% vs 100.0%). IWD’s exposure to Healthcare and Industrials stocks is 17.78% higher and 11.77% higher respectively (17.78% vs. 0.0% and 11.77% vs. 0.0%). In total, Energy, Utilities, and Real Estate also make up 14.58% more of the fund’s holdings compared to XLF (14.58% vs. 0.00%).

Holdings

IWD - Holdings

IWD Holdings Weight
Berkshire Hathaway Inc Class B 2.58%
JPMorgan Chase & Co 2.25%
Johnson & Johnson 2.24%
UnitedHealth Group Inc 1.78%
Procter & Gamble Co 1.71%
The Walt Disney Co 1.5%
Bank of America Corp 1.43%
Comcast Corp Class A 1.33%
Exxon Mobil Corp 1.2%
Pfizer Inc 1.18%

IWD’s Top Holdings are Berkshire Hathaway Inc Class B, JPMorgan Chase & Co, Johnson & Johnson, UnitedHealth Group Inc, and Procter & Gamble Co at 2.58%, 2.25%, 2.24%, 1.78%, and 1.71%.

The Walt Disney Co (1.5%), Bank of America Corp (1.43%), and Comcast Corp Class A (1.33%) have a slightly smaller but still significant weight. Exxon Mobil Corp and Pfizer Inc are also represented in the IWD’s holdings at 1.2% and 1.18%.

XLF - Holdings

XLF Holdings Weight
Berkshire Hathaway Inc Class B 12.83%
JPMorgan Chase & Co 11.47%
Bank of America Corp 7.57%
Wells Fargo & Co 4.56%
Citigroup Inc 3.56%
Morgan Stanley 3.32%
Goldman Sachs Group Inc 3.15%
BlackRock Inc 3.02%
Charles Schwab Corp 2.66%
American Express Co 2.62%

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

IWD XLF
Mean Return 1.03 1.21
R-squared 92.38 73.26
Std. Deviation 14.35 18.86
Alpha -3.23 2.63
Beta 1.02 1.15
Sharpe Ratio 0.81 0.74
Treynor Ratio 11.06 11.25

The iShares Russell 1000 Value ETF (IWD) has a R-squared of 92.38 with a Mean Return of 1.03 and a Beta of 1.02. Its Standard Deviation is 14.35 while IWD’s Sharpe Ratio is 0.81. Furthermore, the fund has a Treynor Ratio of 11.06 and a Alpha of -3.23.

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

IWD’s Mean Return is 0.18 points lower than that of XLF and its R-squared is 19.12 points higher. With a Standard Deviation of 14.35, IWD is slightly less volatile than XLF. The Alpha and Beta of IWD are 5.86 points lower and 0.13 points lower than XLF’s Alpha and Beta.

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Performance

Annual Returns

IWD vs. XLF - Annual Returns

Year IWD XLF
2020 2.67% -1.68%
2019 26.34% 31.88%
2018 -8.4% -13.09%
2017 13.47% 22.03%
2016 17.09% 22.55%
2015 -3.95% -1.6%
2014 13.21% 15.02%
2013 32.18% 35.37%
2012 17.28% 28.53%
2011 0.21% -17.16%
2010 15.3% 11.97%

IWD had its best year in 2013 with an annual return of 32.18%. IWD’s worst year over the past decade yielded -8.4% and occurred in 2018. In most years the iShares Russell 1000 Value ETF provided moderate returns such as in 2014, 2017, and 2010 where annual returns amounted to 13.21%, 13.47%, and 15.3% 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

IWD vs. XLF - Portfolio Growth

Fund Initial Balance Final Balance CAGR
IWD $10,000 $30,746 11.40%
XLF $10,000 $30,782 12.17%

A $10,000 investment in IWD would have resulted in a final balance of $30,746. This is a profit of $20,746 over 11 years and amounts to a compound annual growth rate (CAGR) of 11.40%.

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%.

IWD’s CAGR is 0.77 percentage points lower than that of XLF and as a result, would have yielded $36 less on a $10,000 investment. Thus, IWD performed worse than XLF by 0.77% annually.


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