SCHP vs. XLI: What’s The Difference?

The Schwab U.S. TIPS ETF (SCHP) and the Industrial Select Sector SPDR Fund (XLI) are both among the Top 100 ETFs. SCHP is a Schwab ETFs Inflation-Protected Bond fund and XLI is a SPDR State Street Global Advisors Industrials fund. So, what’s the difference between SCHP and XLI? And which fund is better?

The expense ratio of SCHP is 0.07 percentage points lower than XLI’s (0.05% vs. 0.12%). SCHP is mostly comprised of AAA bonds while XLI has a high exposure to the industrials sector. Overall, SCHP has provided lower returns than XLI over the past 10 years.

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

Summary

SCHP XLI
Name Schwab U.S. TIPS ETF Industrial Select Sector SPDR Fund
Category Inflation-Protected Bond Industrials
Issuer Schwab ETFs SPDR State Street Global Advisors
AUM 18.41B 19.33B
Avg. Return 3.92% 14.44%
Div. Yield 1.97% 1.25%
Expense Ratio 0.05% 0.12%

The Schwab U.S. TIPS ETF (SCHP) is a Inflation-Protected Bond fund that is issued by Schwab ETFs. It currently has 18.41B total assets under management and has yielded an average annual return of 3.92% over the past 10 years. The fund has a dividend yield of 1.97% with an expense ratio of 0.05%.

The Industrial Select Sector SPDR Fund (XLI) is a Industrials fund that is issued by SPDR State Street Global Advisors. It currently has 19.33B total assets under management and has yielded an average annual return of 14.44% over the past 10 years. The fund has a dividend yield of 1.25% with an expense ratio of 0.12%.

SCHP’s dividend yield is 0.72% higher than that of XLI (1.97% vs. 1.25%). Also, SCHP yielded on average 10.53% less per year over the past decade (3.92% vs. 14.44%). The expense ratio of SCHP is 0.07 percentage points lower than XLI’s (0.05% vs. 0.12%).

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Fund Composition

Holdings

SCHP - Holdings

SCHP Bond Sectors Weight
AAA 100.0%
Others 0.0%
Below B 0.0%
B 0.0%
BB 0.0%
BBB 0.0%
A 0.0%
AA 0.0%
US Government 0.0%

SCHP’s Top Bond Sectors are ratings of AAA, Others, Below B, B, and BB at 100.0%, 0.0%, 0.0%, 0.0%, and 0.0%. The fund is less weighted towards BBB (0.0%), A (0.0%), and AA (0.0%) rated bonds.

XLI - Holdings

XLI Holdings Weight
Honeywell International Inc 4.9%
United Parcel Service Inc Class B 4.84%
Union Pacific Corp 4.7%
Boeing Co 4.24%
Raytheon Technologies Corp 4.16%
Caterpillar Inc 3.84%
General Electric Co 3.8%
3M Co 3.7%
Deere & Co 3.54%
Lockheed Martin Corp 2.98%

XLI’s Top Holdings are Honeywell International Inc, United Parcel Service Inc Class B, Union Pacific Corp, Boeing Co, and Raytheon Technologies Corp at 4.9%, 4.84%, 4.7%, 4.24%, and 4.16%.

Caterpillar Inc (3.84%), General Electric Co (3.8%), and 3M Co (3.7%) have a slightly smaller but still significant weight. Deere & Co and Lockheed Martin Corp are also represented in the XLI’s holdings at 3.54% and 2.98%.

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Risk Analysis

SCHP XLI
Mean Return 0.28 1.14
R-squared 66.16 78.97
Std. Deviation 4.32 17.13
Alpha -0.5 2.38
Beta 1.17 1.08
Sharpe Ratio 0.64 0.76
Treynor Ratio 2.31 11.34

The Schwab U.S. TIPS ETF (SCHP) has a Mean Return of 0.28 with a Beta of 1.17 and a R-squared of 66.16. Its Alpha is -0.5 while SCHP’s Standard Deviation is 4.32. Furthermore, the fund has a Sharpe Ratio of 0.64 and a Treynor Ratio of 2.31.

The Industrial Select Sector SPDR Fund (XLI) has a Alpha of 2.38 with a R-squared of 78.97 and a Standard Deviation of 17.13. Its Beta is 1.08 while XLI’s Mean Return is 1.14. Furthermore, the fund has a Sharpe Ratio of 0.76 and a Treynor Ratio of 11.34.

SCHP’s Mean Return is 0.86 points lower than that of XLI and its R-squared is 12.81 points lower. With a Standard Deviation of 4.32, SCHP is slightly less volatile than XLI. The Alpha and Beta of SCHP are 2.88 points lower and 0.09 points higher than XLI’s Alpha and Beta.

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Performance

Annual Returns

SCHP vs. XLI - Annual Returns

Year SCHP XLI
2020 10.94% 11.0%
2019 8.36% 29.11%
2018 -1.31% -13.1%
2017 2.95% 23.85%
2016 4.6% 19.93%
2015 -1.5% -4.27%
2014 3.56% 10.44%
2013 -8.66% 40.44%
2012 6.83% 14.86%
2011 13.38% -1.01%
2010 0.0% 27.62%

SCHP had its best year in 2011 with an annual return of 13.38%. SCHP’s worst year over the past decade yielded -8.66% and occurred in 2013. In most years the Schwab U.S. TIPS ETF provided moderate returns such as in 2017, 2014, and 2016 where annual returns amounted to 2.95%, 3.56%, and 4.6% respectively.

The year 2013 was the strongest year for XLI, returning 40.44% on an annual basis. The poorest year for XLI in the last ten years was 2018, with a yield of -13.1%. Most years the Industrial Select Sector SPDR Fund has given investors modest returns, such as in 2020, 2012, and 2016, when gains were 11.0%, 14.86%, and 19.93% respectively.

Portfolio Growth

SCHP vs. XLI - Portfolio Growth

Fund Initial Balance Final Balance CAGR
SCHP $10,000 $14,418 3.92%
XLI $10,000 $31,228 14.44%

A $10,000 investment in SCHP would have resulted in a final balance of $14,418. This is a profit of $4,418 over 10 years and amounts to a compound annual growth rate (CAGR) of 3.92%.

With a $10,000 investment in XLI, the end total would have been $31,228. This equates to a $21,228 profit over 10 years and a compound annual growth rate (CAGR) of 14.44%.

SCHP’s CAGR is 10.53 percentage points lower than that of XLI and as a result, would have yielded $16,810 less on a $10,000 investment. Thus, SCHP performed worse than XLI by 10.53% annually.


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