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XLE vs. DFAC: What’s The Difference?

The Energy Select Sector SPDR Fund (XLE) and the Dimensional U.S. Core Equity 2 ETF (DFAC) are both among the Top 100 ETFs. XLE is a SPDR State Street Global Advisors Equity Energy fund and DFAC is a Dimensional Fund Advisors Large Blend fund. So, what’s the difference between XLE and DFAC? And which fund is better?

The expense ratio of XLE is 0.07 percentage points lower than DFAC’s (0.12% vs. 0.19%). XLE also has a higher exposure to the energy sector and a higher standard deviation. Overall, XLE has provided lower returns than DFAC over the past 11 years.

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

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Summary

XLEDFAC
NameEnergy Select Sector SPDR FundDimensional U.S. Core Equity 2 ETF
CategoryEquity EnergyLarge Blend
IssuerSPDR State Street Global AdvisorsDimensional Fund Advisors
AUM25.55B13.53B
Avg. Return1.28%13.93%
Div. Yield3.92%1.0%
Expense Ratio0.12%0.19%

The Energy Select Sector SPDR Fund (XLE) is a Equity Energy fund that is issued by SPDR State Street Global Advisors. It currently has 25.55B total assets under management and has yielded an average annual return of 1.28% over the past 10 years. The fund has a dividend yield of 3.92% with an expense ratio of 0.12%.

The Dimensional U.S. Core Equity 2 ETF (DFAC) is a Large Blend fund that is issued by Dimensional Fund Advisors. It currently has 13.53B total assets under management and has yielded an average annual return of 13.93% over the past 10 years. The fund has a dividend yield of 1.0% with an expense ratio of 0.19%.

XLE’s dividend yield is 2.92% higher than that of DFAC (3.92% vs. 1.0%). Also, XLE yielded on average 12.65% less per year over the past decade (1.28% vs. 13.93%). The expense ratio of XLE is 0.07 percentage points lower than DFAC’s (0.12% vs. 0.19%).

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Fund Composition

Industry Exposure

XLE vs. DFAC - Industry Exposure

XLEDFAC
Technology0.0%22.81%
Industrials0.0%14.13%
Energy100.0%2.67%
Communication Services0.0%7.63%
Utilities0.0%1.54%
Healthcare0.0%12.09%
Consumer Defensive0.0%5.94%
Real Estate0.0%0.37%
Financial Services0.0%16.17%
Consumer Cyclical0.0%13.09%
Basic Materials0.0%3.56%

The Energy Select Sector SPDR Fund (XLE) has the most exposure to the Energy 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.

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

The Dimensional U.S. Core Equity 2 ETF (DFAC) has the most exposure to the Technology sector at 22.81%. This is followed by Financial Services and Industrials at 16.17% and 14.13% respectively. Utilities (1.54%), Energy (2.67%), and Basic Materials (3.56%) only make up 7.77% of the fund’s total assets.

DFAC’s mid-section with moderate exposure is comprised of Consumer Defensive, Communication Services, Healthcare, Consumer Cyclical, and Industrials stocks at 5.94%, 7.63%, 12.09%, 13.09%, and 14.13%.

XLE is 97.33% more exposed to the Energy sector than DFAC (100.0% vs 2.67%). XLE’s exposure to Technology and Industrials stocks is 22.81% lower and 14.13% lower respectively (0.0% vs. 22.81% and 0.0% vs. 14.13%). In total, Consumer Cyclical, Financial Services, and Real Estate also make up 29.63% less of the fund’s holdings compared to DFAC (0.00% vs. 29.63%).

Holdings

XLE - Holdings

XLE HoldingsWeight
Exxon Mobil Corp23.7%
Chevron Corp20.03%
ConocoPhillips4.64%
EOG Resources Inc4.46%
Schlumberger Ltd4.43%
Marathon Petroleum Corp4.17%
Pioneer Natural Resources Co4.08%
Phillips 664.07%
Kinder Morgan Inc Class P3.85%
Williams Companies Inc3.5%

XLE’s Top Holdings are Exxon Mobil Corp, Chevron Corp, ConocoPhillips, EOG Resources Inc, and Schlumberger Ltd at 23.7%, 20.03%, 4.64%, 4.46%, and 4.43%.

Marathon Petroleum Corp (4.17%), Pioneer Natural Resources Co (4.08%), and Phillips 66 (4.07%) have a slightly smaller but still significant weight. Kinder Morgan Inc Class P and Williams Companies Inc are also represented in the XLE’s holdings at 3.85% and 3.5%.

DFAC - Holdings

DFAC HoldingsWeight
Apple Inc4.7%
Microsoft Corp3.81%
Amazon.com Inc2.39%
Johnson & Johnson1.05%
Facebook Inc Class A1.05%
JPMorgan Chase & Co1.0%
Alphabet Inc Class C0.85%
Alphabet Inc Class A0.84%
Berkshire Hathaway Inc Class B0.75%
Visa Inc Class A0.74%

DFAC’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Johnson & Johnson, and Facebook Inc Class A at 4.7%, 3.81%, 2.39%, 1.05%, and 1.05%.

JPMorgan Chase & Co (1.0%), Alphabet Inc Class C (0.85%), and Alphabet Inc Class A (0.84%) have a slightly smaller but still significant weight. Berkshire Hathaway Inc Class B and Visa Inc Class A are also represented in the DFAC’s holdings at 0.75% and 0.74%.

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Risk Analysis

XLEDFAC
Mean Return0.321.19
R-squared61.8495.1
Std. Deviation27.5215.55
Alpha-11.98-2.75
Beta1.541.12
Sharpe Ratio0.120.88
Treynor Ratio-0.411.85

The Energy Select Sector SPDR Fund (XLE) has a R-squared of 61.84 with a Beta of 1.54 and a Mean Return of 0.32. Its Alpha is -11.98 while XLE’s Standard Deviation is 27.52. Furthermore, the fund has a Treynor Ratio of -0.4 and a Sharpe Ratio of 0.12.

The Dimensional U.S. Core Equity 2 ETF (DFAC) has a R-squared of 95.1 with a Alpha of -2.75 and a Treynor Ratio of 11.85. Its Standard Deviation is 15.55 while DFAC’s Sharpe Ratio is 0.88. Furthermore, the fund has a Beta of 1.12 and a Mean Return of 1.19.

XLE’s Mean Return is 0.87 points lower than that of DFAC and its R-squared is 33.26 points lower. With a Standard Deviation of 27.52, XLE is slightly more volatile than DFAC. The Alpha and Beta of XLE are 9.23 points lower and 0.42 points higher than DFAC’s Alpha and Beta.

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Performance

Annual Returns

XLE vs. DFAC - Annual Returns

YearXLEDFAC
2020-32.56%15.8%
201911.87%29.54%
2018-18.1%-9.43%
2017-1.01%18.82%
201627.95%16.31%
2015-21.47%-2.53%
2014-8.61%9.56%
201326.16%37.55%
20125.17%17.93%
20112.98%-1.96%
201021.7%21.67%

XLE had its best year in 2016 with an annual return of 27.95%. XLE’s worst year over the past decade yielded -32.56% and occurred in 2020. In most years the Energy Select Sector SPDR Fund provided moderate returns such as in 2017, 2011, and 2012 where annual returns amounted to -1.01%, 2.98%, and 5.17% respectively.

The year 2013 was the strongest year for DFAC, returning 37.55% on an annual basis. The poorest year for DFAC in the last ten years was 2018, with a yield of -9.43%. Most years the Dimensional U.S. Core Equity 2 ETF has given investors modest returns, such as in 2020, 2016, and 2012, when gains were 15.8%, 16.31%, and 17.93% respectively.

Portfolio Growth

XLE vs. DFAC - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
XLE$10,000$9,3391.28%
DFAC$10,000$38,79613.93%

A $10,000 investment in XLE would have resulted in a final balance of $9,339. This is a profit of $-661 over 11 years and amounts to a compound annual growth rate (CAGR) of 1.28%.

With a $10,000 investment in DFAC, the end total would have been $38,796. This equates to a $28,796 profit over 11 years and a compound annual growth rate (CAGR) of 13.93%.

XLE’s CAGR is 12.65 percentage points lower than that of DFAC and as a result, would have yielded $29,457 less on a $10,000 investment. Thus, XLE performed worse than DFAC by 12.65% annually.


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