The Schwab U.S. Small-Cap ETF (SCHA) and the Communication Services Select Sector SPDR Fund (XLC) are both among the Top 100 ETFs. SCHA is a Schwab ETFs Small Blend fund and XLC is a SPDR State Street Global Advisors Communications fund. So, what’s the difference between SCHA and XLC? And which fund is better?
The expense ratio of SCHA is 0.08 percentage points lower than XLC’s (0.04% vs. 0.12%). SCHA also has a higher exposure to the healthcare sector and a higher standard deviation. Overall, SCHA has provided lower returns than XLC over the past 2 years.
In this article, we’ll compare SCHA vs. XLC. We’ll look at fund composition and performance, as well as at their annual returns and industry exposure. Moreover, I’ll also discuss SCHA’s and XLC’s portfolio growth, holdings, and risk metrics and examine how these affect their overall returns.
Summary
| SCHA | XLC | |
| Name | Schwab U.S. Small-Cap ETF | Communication Services Select Sector SPDR Fund |
| Category | Small Blend | Communications |
| Issuer | Schwab ETFs | SPDR State Street Global Advisors |
| AUM | 16.51B | 14.09B |
| Avg. Return | 12.62% | 29.04% |
| Div. Yield | 0.98% | 0.62% |
| Expense Ratio | 0.04% | 0.12% |
The Schwab U.S. Small-Cap ETF (SCHA) is a Small Blend fund that is issued by Schwab ETFs. It currently has 16.51B total assets under management and has yielded an average annual return of 12.62% over the past 10 years. The fund has a dividend yield of 0.98% with an expense ratio of 0.04%.
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%.
SCHA’s dividend yield is 0.36% higher than that of XLC (0.98% vs. 0.62%). Also, SCHA yielded on average 16.41% less per year over the past decade (12.62% vs. 29.04%). The expense ratio of SCHA is 0.08 percentage points lower than XLC’s (0.04% vs. 0.12%).
Fund Composition
Industry Exposure
| SCHA | XLC | |
| Technology | 14.91% | 0.0% |
| Industrials | 15.37% | 0.0% |
| Energy | 3.35% | 0.0% |
| Communication Services | 3.5% | 100.0% |
| Utilities | 1.83% | 0.0% |
| Healthcare | 16.5% | 0.0% |
| Consumer Defensive | 3.75% | 0.0% |
| Real Estate | 7.83% | 0.0% |
| Financial Services | 14.49% | 0.0% |
| Consumer Cyclical | 14.48% | 0.0% |
| Basic Materials | 3.98% | 0.0% |
The Schwab U.S. Small-Cap ETF (SCHA) has the most exposure to the Healthcare sector at 16.5%. This is followed by Industrials and Technology at 15.37% and 14.91% respectively. Energy (3.35%), Communication Services (3.5%), and Consumer Defensive (3.75%) only make up 10.60% of the fund’s total assets.
SCHA’s mid-section with moderate exposure is comprised of Basic Materials, Real Estate, Consumer Cyclical, Financial Services, and Technology stocks at 3.98%, 7.83%, 14.48%, 14.49%, and 14.91%.
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%.
SCHA is 16.50% more exposed to the Healthcare sector than XLC (16.5% vs 0.0%). SCHA’s exposure to Industrials and Technology stocks is 15.37% higher and 14.91% higher respectively (15.37% vs. 0.0% and 14.91% vs. 0.0%). In total, Energy, Communication Services, and Consumer Defensive also make up 89.40% less of the fund’s holdings compared to XLC (10.60% vs. 100.00%).
Holdings
| SCHA Holdings | Weight |
| AMC Entertainment Holdings Inc Class A | 0.67% |
| Caesars Entertainment Inc | 0.51% |
| Cloudflare Inc | 0.48% |
| NovoCure Ltd | 0.45% |
| Plug Power Inc | 0.41% |
| 10x Genomics Inc Ordinary Shares – Class A | 0.34% |
| GameStop Corp Class A | 0.28% |
| RH | 0.27% |
| Penn National Gaming Inc | 0.27% |
| Axon Enterprise Inc | 0.27% |
SCHA’s Top Holdings are AMC Entertainment Holdings Inc Class A, Caesars Entertainment Inc, Cloudflare Inc, NovoCure Ltd, and Plug Power Inc at 0.67%, 0.51%, 0.48%, 0.45%, and 0.41%.
10x Genomics Inc Ordinary Shares – Class A (0.34%), GameStop Corp Class A (0.28%), and RH (0.27%) have a slightly smaller but still significant weight. Penn National Gaming Inc and Axon Enterprise Inc are also represented in the SCHA’s holdings at 0.27% and 0.27%.
| 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
| SCHA | XLC | |
| Mean Return | 1.14 | 0 |
| R-squared | 82.26 | 0 |
| Std. Deviation | 18.68 | 0 |
| Alpha | -4.65 | 0 |
| Beta | 1.25 | 0 |
| Sharpe Ratio | 0.7 | 0 |
| Treynor Ratio | 9.62 | 0 |
The Schwab U.S. Small-Cap ETF (SCHA) has a Standard Deviation of 18.68 with a Beta of 1.25 and a Treynor Ratio of 9.62. Its Mean Return is 1.14 while SCHA’s Sharpe Ratio is 0.7. Furthermore, the fund has a Alpha of -4.65 and a R-squared of 82.26.
The Communication Services Select Sector SPDR Fund (XLC) has a Mean Return of 0 with a Treynor Ratio of 0 and a Alpha of 0. Its Standard Deviation is 0 while XLC’s Sharpe Ratio is 0. Furthermore, the fund has a Beta of 0 and a R-squared of 0.
SCHA’s Mean Return is 1.14 points higher than that of XLC and its R-squared is 82.26 points higher. With a Standard Deviation of 18.68, SCHA is slightly more volatile than XLC. The Alpha and Beta of SCHA are 4.65 points lower and 1.25 points higher than XLC’s Alpha and Beta.
Performance
Annual Returns
| Year | SCHA | XLC |
| 2020 | 19.35% | 26.85% |
| 2019 | 26.54% | 31.22% |
| 2018 | -11.75% | 0.0% |
| 2017 | 15.04% | 0.0% |
| 2016 | 19.88% | 0.0% |
| 2015 | -4.24% | 0.0% |
| 2014 | 6.53% | 0.0% |
| 2013 | 39.59% | 0.0% |
| 2012 | 18.24% | 0.0% |
| 2011 | -2.95% | 0.0% |
| 2010 | 28.31% | 0.0% |
SCHA had its best year in 2013 with an annual return of 39.59%. SCHA’s worst year over the past decade yielded -11.75% and occurred in 2018. In most years the Schwab U.S. Small-Cap ETF provided moderate returns such as in 2017, 2012, and 2020 where annual returns amounted to 15.04%, 18.24%, and 19.35% 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
| Fund | Initial Balance | Final Balance | CAGR |
| SCHA | $10,000 | $15,102 | 12.62% |
| XLC | $10,000 | $16,645 | 29.04% |
A $10,000 investment in SCHA would have resulted in a final balance of $15,102. This is a profit of $5,102 over 2 years and amounts to a compound annual growth rate (CAGR) of 12.62%.
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%.
SCHA’s CAGR is 16.41 percentage points lower than that of XLC and as a result, would have yielded $1,543 less on a $10,000 investment. Thus, SCHA performed worse than XLC by 16.41% annually.
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