IWD vs. XLK: What’s The Difference?

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

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

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

Summary

IWD XLK
Name iShares Russell 1000 Value ETF Technology Select Sector SPDR Fund
Category Large Value Technology
Issuer iShares SPDR State Street Global Advisors
AUM 54.1B 42.3B
Avg. Return 11.40% 20.02%
Div. Yield 1.57% 0.73%
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 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%.

IWD’s dividend yield is 0.84% higher than that of XLK (1.57% vs. 0.73%). Also, IWD yielded on average 8.62% less per year over the past decade (11.40% vs. 20.02%). The expense ratio of IWD is 0.07 percentage points higher than XLK’s (0.19% vs. 0.12%).

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Fund Composition

Industry Exposure

IWD vs. XLK - Industry Exposure

IWD XLK
Technology 10.28% 87.54%
Industrials 11.77% 1.75%
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% 10.71%
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 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%.

IWD is 9.72% more exposed to the Financial Services sector than XLK (20.43% vs 10.71%). IWD’s exposure to Healthcare and Industrials stocks is 17.78% higher and 10.02% higher respectively (17.78% vs. 0.0% and 11.77% vs. 1.75%). In total, Energy, Utilities, and Real Estate also make up 14.58% more of the fund’s holdings compared to XLK (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%.

XLK - Holdings

XLK Holdings Weight
Apple Inc 21.45%
Microsoft Corp 20.37%
NVIDIA Corp 4.98%
Visa Inc Class A 3.95%
PayPal Holdings Inc 3.42%
Mastercard Inc A 3.19%
Adobe Inc 2.8%
Salesforce.com Inc 2.26%
Intel Corp 2.26%
Cisco Systems Inc 2.23%

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%.

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Risk Analysis

IWD XLK
Mean Return 1.03 1.7
R-squared 92.38 73.56
Std. Deviation 14.35 15.58
Alpha -3.23 10.43
Beta 1.02 0.95
Sharpe Ratio 0.81 1.27
Treynor Ratio 11.06 21.44

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

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

IWD’s Mean Return is 0.67 points lower than that of XLK and its R-squared is 18.82 points higher. With a Standard Deviation of 14.35, IWD is slightly less volatile than XLK. The Alpha and Beta of IWD are 13.66 points lower and 0.07 points higher than XLK’s Alpha and Beta.

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Performance

Annual Returns

IWD vs. XLK - Annual Returns

Year IWD XLK
2020 2.67% 43.67%
2019 26.34% 49.97%
2018 -8.4% -1.56%
2017 13.47% 34.27%
2016 17.09% 14.81%
2015 -3.95% 5.62%
2014 13.21% 17.75%
2013 32.18% 25.98%
2012 17.28% 15.47%
2011 0.21% 2.69%
2010 15.3% 11.6%

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 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

IWD vs. XLK - Portfolio Growth

Fund Initial Balance Final Balance CAGR
IWD $10,000 $30,746 11.40%
XLK $10,000 $67,790 20.02%

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 XLK, the end total would have been $67,790. This equates to a $57,790 profit over 11 years and a compound annual growth rate (CAGR) of 20.02%.

IWD’s CAGR is 8.62 percentage points lower than that of XLK and as a result, would have yielded $37,044 less on a $10,000 investment. Thus, IWD performed worse than XLK by 8.62% annually.


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