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IWF vs. XLK: What’s The Difference?

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

Introduction To Mutual Funds
Introduction To Mutual Funds

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

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

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Summary

IWFXLK
NameiShares Russell 1000 Growth ETFTechnology Select Sector SPDR Fund
CategoryLarge GrowthTechnology
IssueriSharesSPDR State Street Global Advisors
AUM72.16B42.3B
Avg. Return17.72%20.02%
Div. Yield0.52%0.73%
Expense Ratio0.19%0.12%

The iShares Russell 1000 Growth ETF (IWF) is a Large Growth fund that is issued by iShares. It currently has 72.16B total assets under management and has yielded an average annual return of 17.72% over the past 10 years. The fund has a dividend yield of 0.52% 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%.

IWF’s dividend yield is 0.21% lower than that of XLK (0.52% vs. 0.73%). Also, IWF yielded on average 2.30% less per year over the past decade (17.72% vs. 20.02%). The expense ratio of IWF is 0.07 percentage points higher than XLK’s (0.19% vs. 0.12%).

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Fund Composition

Industry Exposure

IWF vs. XLK - Industry Exposure

IWFXLK
Technology39.29%87.54%
Industrials6.19%1.75%
Energy0.28%0.0%
Communication Services12.82%0.0%
Utilities0.03%0.0%
Healthcare9.23%0.0%
Consumer Defensive4.31%0.0%
Real Estate1.85%0.0%
Financial Services7.36%10.71%
Consumer Cyclical17.62%0.0%
Basic Materials1.01%0.0%

The iShares Russell 1000 Growth ETF (IWF) has the most exposure to the Technology sector at 39.29%. This is followed by Consumer Cyclical and Communication Services at 17.62% and 12.82% respectively. Energy (0.28%), Basic Materials (1.01%), and Real Estate (1.85%) only make up 3.14% of the fund’s total assets.

IWF’s mid-section with moderate exposure is comprised of Consumer Defensive, Industrials, Financial Services, Healthcare, and Communication Services stocks at 4.31%, 6.19%, 7.36%, 9.23%, and 12.82%.

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%.

IWF is 48.25% less exposed to the Technology sector than XLK (39.29% vs 87.54%). IWF’s exposure to Consumer Cyclical and Communication Services stocks is 17.62% higher and 12.82% higher respectively (17.62% vs. 0.0% and 12.82% vs. 0.0%). In total, Energy, Basic Materials, and Real Estate also make up 3.14% more of the fund’s holdings compared to XLK (3.14% vs. 0.00%).

Holdings

IWF - Holdings

IWF HoldingsWeight
Apple Inc10.51%
Microsoft Corp9.85%
Amazon.com Inc6.63%
Facebook Inc Class A3.91%
Alphabet Inc Class A3.2%
Alphabet Inc Class C3.03%
Tesla Inc2.45%
NVIDIA Corp2.14%
Visa Inc Class A1.91%
The Home Depot Inc1.62%

IWF’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc Class A, and Alphabet Inc Class A at 10.51%, 9.85%, 6.63%, 3.91%, and 3.2%.

Alphabet Inc Class C (3.03%), Tesla Inc (2.45%), and NVIDIA Corp (2.14%) have a slightly smaller but still significant weight. Visa Inc Class A and The Home Depot Inc are also represented in the IWF’s holdings at 1.91% and 1.62%.

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%.

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Risk Analysis

IWFXLK
Mean Return1.481.7
R-squared92.9373.56
Std. Deviation14.4215.58
Alpha2.1610.43
Beta1.030.95
Sharpe Ratio1.191.27
Treynor Ratio17.121.44

The iShares Russell 1000 Growth ETF (IWF) has a R-squared of 92.93 with a Alpha of 2.16 and a Sharpe Ratio of 1.19. Its Beta is 1.03 while IWF’s Standard Deviation is 14.42. Furthermore, the fund has a Mean Return of 1.48 and a Treynor Ratio of 17.1.

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

IWF’s Mean Return is 0.22 points lower than that of XLK and its R-squared is 19.37 points higher. With a Standard Deviation of 14.42, IWF is slightly less volatile than XLK. The Alpha and Beta of IWF are 8.27 points lower and 0.08 points higher than XLK’s Alpha and Beta.

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Performance

Annual Returns

IWF vs. XLK - Annual Returns

YearIWFXLK
202038.21%43.67%
201936.08%49.97%
2018-1.68%-1.56%
201729.96%34.27%
20166.92%14.81%
20155.48%5.62%
201412.84%17.75%
201333.19%25.98%
201215.03%15.47%
20112.47%2.69%
201016.47%11.6%

IWF had its best year in 2020 with an annual return of 38.21%. IWF’s worst year over the past decade yielded -1.68% and occurred in 2018. In most years the iShares Russell 1000 Growth ETF provided moderate returns such as in 2014, 2012, and 2010 where annual returns amounted to 12.84%, 15.03%, and 16.47% 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

IWF vs. XLK - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
IWF$10,000$55,92017.72%
XLK$10,000$67,79020.02%

A $10,000 investment in IWF would have resulted in a final balance of $55,920. This is a profit of $45,920 over 11 years and amounts to a compound annual growth rate (CAGR) of 17.72%.

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%.

IWF’s CAGR is 2.30 percentage points lower than that of XLK and as a result, would have yielded $11,870 less on a $10,000 investment. Thus, IWF performed worse than XLK by 2.30% annually.


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