The Energy Select Sector SPDR Fund (XLE) and the iShares U.S. Treasury Bond ETF (GOVT) are both among the Top 100 ETFs. XLE is a SPDR State Street Global Advisors Equity Energy fund and GOVT is a iShares Intermediate Government fund. So, what’s the difference between XLE and GOVT? And which fund is better?
The expense ratio of XLE is 0.07 percentage points higher than GOVT’s (0.12% vs. 0.05%). XLE also has a high exposure to the energy sector while GOVT is mostly comprised of AAA bonds. Overall, XLE has provided lower returns than GOVT over the past 8 years.
In this article, we’ll compare XLE vs. GOVT. We’ll look at risk metrics and performance, as well as at their fund composition and portfolio growth. Moreover, I’ll also discuss XLE’s and GOVT’s industry exposure, holdings, and annual returns and examine how these affect their overall returns.
|Name||Energy Select Sector SPDR Fund||iShares U.S. Treasury Bond ETF|
|Category||Equity Energy||Intermediate Government|
|Issuer||SPDR State Street Global Advisors||iShares|
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 iShares U.S. Treasury Bond ETF (GOVT) is a Intermediate Government fund that is issued by iShares. It currently has 17.07B total assets under management and has yielded an average annual return of 2.67% over the past 10 years. The fund has a dividend yield of 1.0% with an expense ratio of 0.05%.
XLE’s dividend yield is 2.92% higher than that of GOVT (3.92% vs. 1.0%). Also, XLE yielded on average 1.39% less per year over the past decade (1.28% vs. 2.67%). The expense ratio of XLE is 0.07 percentage points higher than GOVT’s (0.12% vs. 0.05%).
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|Exxon Mobil Corp||23.7%|
|EOG Resources Inc||4.46%|
|Marathon Petroleum Corp||4.17%|
|Pioneer Natural Resources Co||4.08%|
|Kinder Morgan Inc Class P||3.85%|
|Williams Companies Inc||3.5%|
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%.
|GOVT Bond Sectors||Weight|
GOVT’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.
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The Energy Select Sector SPDR Fund (XLE) has a Alpha of -11.98 with a Sharpe Ratio of 0.12 and a R-squared of 61.84. Its Beta is 1.54 while XLE’s Treynor Ratio is -0.4. Furthermore, the fund has a Standard Deviation of 27.52 and a Mean Return of 0.32.
The iShares U.S. Treasury Bond ETF (GOVT) has a Beta of 0 with a Alpha of 0 and a R-squared of 0. Its Mean Return is 0 while GOVT’s Standard Deviation is 0. Furthermore, the fund has a Sharpe Ratio of 0 and a Treynor Ratio of 0.
XLE’s Mean Return is 0.32 points higher than that of GOVT and its R-squared is 61.84 points higher. With a Standard Deviation of 27.52, XLE is slightly more volatile than GOVT. The Alpha and Beta of XLE are 11.98 points lower and 1.54 points higher than GOVT’s Alpha and Beta.
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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 2020 was the strongest year for GOVT, returning 7.92% on an annual basis. The poorest year for GOVT in the last ten years was 2013, with a yield of -2.84%. Most years the iShares U.S. Treasury Bond ETF has given investors modest returns, such as in 2018, 2015, and 2016, when gains were 0.74%, 0.76%, and 0.92% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in XLE would have resulted in a final balance of $7,086. This is a profit of $-2,914 over 8 years and amounts to a compound annual growth rate (CAGR) of 1.28%.
With a $10,000 investment in GOVT, the end total would have been $12,297. This equates to a $2,297 profit over 8 years and a compound annual growth rate (CAGR) of 2.67%.
XLE’s CAGR is 1.39 percentage points lower than that of GOVT and as a result, would have yielded $5,211 less on a $10,000 investment. Thus, XLE performed worse than GOVT by 1.39% annually.
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