The Schwab U.S. Large-Cap ETF (SCHX) and the Industrial Select Sector SPDR Fund (XLI) are both among the Top 100 ETFs. SCHX is a Schwab ETFs Large Blend fund and XLI is a SPDR State Street Global Advisors Industrials fund. So, what’s the difference between SCHX and XLI? And which fund is better?
The expense ratio of SCHX is 0.09 percentage points lower than XLI’s (0.03% vs. 0.12%). SCHX also has a higher exposure to the technology sector and a lower standard deviation. Overall, SCHX has provided higher returns than XLI over the past ten years.
In this article, we’ll compare SCHX vs. XLI. We’ll look at industry exposure and holdings, as well as at their portfolio growth and performance. Moreover, I’ll also discuss SCHX’s and XLI’s fund composition, annual returns, and risk metrics and examine how these affect their overall returns.
FYI: Another great way to get exposure to the real estate sector is by investing in real estate debt. Groundfloor offers fantastic short-term, high-yield bonds that can add diversification to your portfolio!
|Name||Schwab U.S. Large-Cap ETF||Industrial Select Sector SPDR Fund|
|Issuer||Schwab ETFs||SPDR State Street Global Advisors|
The Schwab U.S. Large-Cap ETF (SCHX) is a Large Blend fund that is issued by Schwab ETFs. It currently has 30.89B total assets under management and has yielded an average annual return of 14.60% over the past 10 years. The fund has a dividend yield of 1.41% with an expense ratio of 0.03%.
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%.
SCHX’s dividend yield is 0.16% higher than that of XLI (1.41% vs. 1.25%). Also, SCHX yielded on average 0.16% more per year over the past decade (14.60% vs. 14.44%). The expense ratio of SCHX is 0.09 percentage points lower than XLI’s (0.03% vs. 0.12%).
FYI: The best way I've found to invest is through M1 Finance. It's free and you even get an instant line of credit and 100$! Have a look here (link to M1 Finance).
The Schwab U.S. Large-Cap ETF (SCHX) has the most exposure to the Technology sector at 25.13%. This is followed by Financial Services and Healthcare at 13.82% and 13.04% respectively. Utilities (2.37%), Energy (2.72%), and Real Estate (3.13%) only make up 8.22% of the fund’s total assets.
SCHX’s mid-section with moderate exposure is comprised of Consumer Defensive, Industrials, Communication Services, Consumer Cyclical, and Healthcare stocks at 5.97%, 8.65%, 11.26%, 11.63%, and 13.04%.
The Industrial Select Sector SPDR Fund (XLI) has the most exposure to the Industrials sector at 97.49%. This is followed by Technology and Consumer Cyclical at 1.82% and 0.69% respectively. Financial Services (0.0%), Real Estate (0.0%), and Consumer Defensive (0.0%) only make up 0.00% of the fund’s total assets.
XLI’s mid-section with moderate exposure is comprised of Healthcare, Utilities, Communication Services, Energy, and Consumer Cyclical stocks at 0.0%, 0.0%, 0.0%, 0.0%, and 0.69%.
SCHX is 23.31% more exposed to the Technology sector than XLI (25.13% vs 1.82%). SCHX’s exposure to Financial Services and Healthcare stocks is 13.82% higher and 13.04% higher respectively (13.82% vs. 0.0% and 13.04% vs. 0.0%). In total, Utilities, Energy, and Real Estate also make up 8.22% more of the fund’s holdings compared to XLI (8.22% vs. 0.00%).
|Facebook Inc A||2.08%|
|Alphabet Inc A||1.84%|
|Alphabet Inc Class C||1.78%|
|Berkshire Hathaway Inc Class B||1.32%|
|JPMorgan Chase & Co||1.18%|
SCHX’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc A, and Alphabet Inc A at 5.37%, 5.1%, 3.69%, 2.08%, and 1.84%.
Alphabet Inc Class C (1.78%), Berkshire Hathaway Inc Class B (1.32%), and Tesla Inc (1.31%) have a slightly smaller but still significant weight. NVIDIA Corp and JPMorgan Chase & Co are also represented in the SCHX’s holdings at 1.25% and 1.18%.
|Honeywell International Inc||4.9%|
|United Parcel Service Inc Class B||4.84%|
|Union Pacific Corp||4.7%|
|Raytheon Technologies Corp||4.16%|
|General Electric Co||3.8%|
|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%.
The Schwab U.S. Large-Cap ETF (SCHX) has a Standard Deviation of 13.8 with a Alpha of -0.14 and a Treynor Ratio of 14.06. Its R-squared is 99.83 while SCHX’s Mean Return is 1.24. Furthermore, the fund has a Sharpe Ratio of 1.03 and a Beta of 1.02.
The Industrial Select Sector SPDR Fund (XLI) has a Sharpe Ratio of 0.76 with a R-squared of 78.97 and a Mean Return of 1.14. Its Beta is 1.08 while XLI’s Alpha is 2.38. Furthermore, the fund has a Treynor Ratio of 11.34 and a Standard Deviation of 17.13.
SCHX’s Mean Return is 0.10 points higher than that of XLI and its R-squared is 20.86 points higher. With a Standard Deviation of 13.8, SCHX is slightly less volatile than XLI. The Alpha and Beta of SCHX are 2.52 points lower and 0.06 points lower than XLI’s Alpha and Beta.
NOTE: The easiest way to add diversification to your portfolio is to invest in real estate through Fundrise. You can become private real estate investor without the burden of property management! Check it out here (link to Fundrise).
SCHX had its best year in 2013 with an annual return of 32.54%. SCHX’s worst year over the past decade yielded -4.52% and occurred in 2018. In most years the Schwab U.S. Large-Cap ETF provided moderate returns such as in 2014, 2010, and 2012 where annual returns amounted to 13.33%, 15.88%, and 16.06% 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.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in SCHX would have resulted in a final balance of $36,987. This is a profit of $26,987 over 10 years and amounts to a compound annual growth rate (CAGR) of 14.60%.
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%.
SCHX’s CAGR is 0.16 percentage points higher than that of XLI and as a result, would have yielded $5,759 more on a $10,000 investment. Thus, SCHX outperformed XLI by 0.16% annually.
Over the past years, I have discovered several tools and products that have helped me tremendously on my path to financial freedom:
P.S.: The links below are affiliate links, which means I receive a small commission at no extra cost to you when you sign up for one of the services. Thank you for your support!
1)Personal Capital is simply the best tool out there to track your net worth and plan for financial freedom. Just their retirement planner alone has become an invaluable tool to keep myself on track financially. Try it out, it's free!
2) Take a look at M1 Finance, my favorite broker. I love how easy it is to invest and maintain my portfolio with them. I can set up automatic transfers, rebalance my portfolio with one click and even borrow up to 35% of my assets at super low interest rates!
3) Fundrise is by far the best way I've found to invest in Real Estate. You can diversify your portfolio by investing in their eREITs or even allocate capital to individual properties (without the hassle of managing tenants!).
4) Groundfloor is another great way to get exposure to the real estate sector by investing in short-term, high-yield real estate debt. Current returns are >10% and you can get started with just $10.
5) If you are interested in startup investing, check out Mainvest. I've started allocating a small amount of assets to invest in and support small businesses. Return targets are between 10-25% and you can start with just $100!
To see all of my most up-to-date recommendations, check out the Recommended Tools section.