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IWM vs. XLV: What’s The Difference?

The iShares Russell 2000 ETF (IWM) and the Health Care Select Sector SPDR Fund (XLV) are both among the Top 100 ETFs. IWM is a iShares Small Blend fund and XLV is a SPDR State Street Global Advisors Health fund. So, what’s the difference between IWM and XLV? And which fund is better?

Introduction To Mutual Funds
Introduction To Mutual Funds

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

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

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Summary

IWMXLV
NameiShares Russell 2000 ETFHealth Care Select Sector SPDR Fund
CategorySmall BlendHealth
IssueriSharesSPDR State Street Global Advisors
AUM66.48B27.88B
Avg. Return13.52%15.02%
Div. Yield0.86%1.4%
Expense Ratio0.19%0.12%

The iShares Russell 2000 ETF (IWM) is a Small Blend fund that is issued by iShares. It currently has 66.48B total assets under management and has yielded an average annual return of 13.52% over the past 10 years. The fund has a dividend yield of 0.86% with an expense ratio of 0.19%.

The Health Care Select Sector SPDR Fund (XLV) is a Health fund that is issued by SPDR State Street Global Advisors. It currently has 27.88B total assets under management and has yielded an average annual return of 15.02% over the past 10 years. The fund has a dividend yield of 1.4% with an expense ratio of 0.12%.

IWM’s dividend yield is 0.54% lower than that of XLV (0.86% vs. 1.4%). Also, IWM yielded on average 1.50% less per year over the past decade (13.52% vs. 15.02%). The expense ratio of IWM is 0.07 percentage points higher than XLV’s (0.19% vs. 0.12%).

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Fund Composition

Industry Exposure

IWM vs. XLV - Industry Exposure

IWMXLV
Technology14.21%0.0%
Industrials14.78%0.0%
Energy3.74%0.0%
Communication Services3.79%0.0%
Utilities2.44%0.0%
Healthcare20.3%100.0%
Consumer Defensive3.65%0.0%
Real Estate8.59%0.0%
Financial Services13.76%0.0%
Consumer Cyclical10.99%0.0%
Basic Materials3.74%0.0%

The iShares Russell 2000 ETF (IWM) has the most exposure to the Healthcare sector at 20.3%. This is followed by Industrials and Technology at 14.78% and 14.21% respectively. Consumer Defensive (3.65%), Basic Materials (3.74%), and Energy (3.74%) only make up 11.13% of the fund’s total assets.

IWM’s mid-section with moderate exposure is comprised of Communication Services, Real Estate, Consumer Cyclical, Financial Services, and Technology stocks at 3.79%, 8.59%, 10.99%, 13.76%, and 14.21%.

The Health Care Select Sector SPDR Fund (XLV) has the most exposure to the Healthcare 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.

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

IWM is 79.70% less exposed to the Healthcare sector than XLV (20.3% vs 100.0%). IWM’s exposure to Industrials and Technology stocks is 14.78% higher and 14.21% higher respectively (14.78% vs. 0.0% and 14.21% vs. 0.0%). In total, Consumer Defensive, Basic Materials, and Energy also make up 11.13% more of the fund’s holdings compared to XLV (11.13% vs. 0.00%).

Holdings

IWM - Holdings

IWM HoldingsWeight
AMC Entertainment Holdings Inc Class A0.52%
Intellia Therapeutics Inc0.33%
Crocs Inc0.3%
BlackRock Cash Funds Treasury SL Agency0.29%
Tenet Healthcare Corp0.26%
Lattice Semiconductor Corp0.26%
Tetra Tech Inc0.25%
II-VI Inc0.25%
EastGroup Properties Inc0.24%
Arrowhead Pharmaceuticals Inc0.24%

IWM’s Top Holdings are AMC Entertainment Holdings Inc Class A, Intellia Therapeutics Inc, Crocs Inc, BlackRock Cash Funds Treasury SL Agency, and Tenet Healthcare Corp at 0.52%, 0.33%, 0.3%, 0.29%, and 0.26%.

Lattice Semiconductor Corp (0.26%), Tetra Tech Inc (0.25%), and II-VI Inc (0.25%) have a slightly smaller but still significant weight. EastGroup Properties Inc and Arrowhead Pharmaceuticals Inc are also represented in the IWM’s holdings at 0.24% and 0.24%.

XLV - Holdings

XLV HoldingsWeight
Johnson & Johnson9.19%
UnitedHealth Group Inc8.01%
Pfizer Inc4.64%
Abbott Laboratories4.36%
AbbVie Inc4.21%
Thermo Fisher Scientific Inc4.2%
Merck & Co Inc4.17%
Eli Lilly and Co3.87%
Danaher Corp3.61%
Medtronic PLC3.54%

XLV’s Top Holdings are Johnson & Johnson, UnitedHealth Group Inc, Pfizer Inc, Abbott Laboratories, and AbbVie Inc at 9.19%, 8.01%, 4.64%, 4.36%, and 4.21%.

Thermo Fisher Scientific Inc (4.2%), Merck & Co Inc (4.17%), and Eli Lilly and Co (3.87%) have a slightly smaller but still significant weight. Danaher Corp and Medtronic PLC are also represented in the XLV’s holdings at 3.61% and 3.54%.

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Risk Analysis

IWMXLV
Mean Return1.121.27
R-squared77.7358.19
Std. Deviation18.8712.94
Alpha-5.127.75
Beta1.230.7
Sharpe Ratio0.681.13
Treynor Ratio9.5621.1

The iShares Russell 2000 ETF (IWM) has a Standard Deviation of 18.87 with a Treynor Ratio of 9.56 and a Alpha of -5.12. Its Beta is 1.23 while IWM’s R-squared is 77.73. Furthermore, the fund has a Sharpe Ratio of 0.68 and a Mean Return of 1.12.

The Health Care Select Sector SPDR Fund (XLV) has a Beta of 0.7 with a Sharpe Ratio of 1.13 and a Alpha of 7.75. Its Treynor Ratio is 21.1 while XLV’s Standard Deviation is 12.94. Furthermore, the fund has a Mean Return of 1.27 and a R-squared of 58.19.

IWM’s Mean Return is 0.15 points lower than that of XLV and its R-squared is 19.54 points higher. With a Standard Deviation of 18.87, IWM is slightly more volatile than XLV. The Alpha and Beta of IWM are 12.87 points lower and 0.53 points higher than XLV’s Alpha and Beta.

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Performance

Annual Returns

IWM vs. XLV - Annual Returns

YearIWMXLV
202019.89%13.33%
201925.42%20.63%
2018-11.02%6.3%
201714.66%21.7%
201621.36%-2.83%
2015-4.33%6.82%
20144.94%25.17%
201338.85%41.24%
201216.39%17.56%
2011-4.19%12.44%
201026.76%2.91%

IWM had its best year in 2013 with an annual return of 38.85%. IWM’s worst year over the past decade yielded -11.02% and occurred in 2018. In most years the iShares Russell 2000 ETF provided moderate returns such as in 2017, 2012, and 2020 where annual returns amounted to 14.66%, 16.39%, and 19.89% respectively.

The year 2013 was the strongest year for XLV, returning 41.24% on an annual basis. The poorest year for XLV in the last ten years was 2016, with a yield of -2.83%. Most years the Health Care Select Sector SPDR Fund has given investors modest returns, such as in 2011, 2020, and 2012, when gains were 12.44%, 13.33%, and 17.56% respectively.

Portfolio Growth

IWM vs. XLV - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
IWM$10,000$36,68613.52%
XLV$10,000$44,14715.02%

A $10,000 investment in IWM would have resulted in a final balance of $36,686. This is a profit of $26,686 over 11 years and amounts to a compound annual growth rate (CAGR) of 13.52%.

With a $10,000 investment in XLV, the end total would have been $44,147. This equates to a $34,147 profit over 11 years and a compound annual growth rate (CAGR) of 15.02%.

IWM’s CAGR is 1.50 percentage points lower than that of XLV and as a result, would have yielded $7,461 less on a $10,000 investment. Thus, IWM performed worse than XLV by 1.50% annually.


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