The Energy Select Sector SPDR Fund (XLE) and the iShares 1-5 Year Investment Grade Corporate Bond ETF (IGSB) are both among the Top 100 ETFs. XLE is a SPDR State Street Global Advisors Equity Energy fund and IGSB is a iShares Short-Term Bond fund. So, what’s the difference between XLE and IGSB? And which fund is better?
The expense ratio of XLE is 0.06 percentage points higher than IGSB’s (0.12% vs. 0.06%). XLE also has a high exposure to the energy sector while IGSB is mostly comprised of BBB bonds. Overall, XLE has provided lower returns than IGSB over the past 11 years.
In this article, we’ll compare XLE vs. IGSB. We’ll look at industry exposure and fund composition, as well as at their holdings and portfolio growth. Moreover, I’ll also discuss XLE’s and IGSB’s risk metrics, annual returns, and performance and examine how these affect their overall returns.
|Name||Energy Select Sector SPDR Fund||iShares 1-5 Year Investment Grade Corporate Bond ETF|
|Category||Equity Energy||Short-Term Bond|
|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 1-5 Year Investment Grade Corporate Bond ETF (IGSB) is a Short-Term Bond fund that is issued by iShares. It currently has 26.63B total assets under management and has yielded an average annual return of 2.51% over the past 10 years. The fund has a dividend yield of 2.02% with an expense ratio of 0.06%.
XLE’s dividend yield is 1.90% higher than that of IGSB (3.92% vs. 2.02%). Also, XLE yielded on average 1.23% less per year over the past decade (1.28% vs. 2.51%). The expense ratio of XLE is 0.06 percentage points higher than IGSB’s (0.12% vs. 0.06%).
|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%.
|IGSB Bond Sectors||Weight|
IGSB’s Top Bond Sectors are ratings of BBB, A, AA, AAA, and BB at 50.48%, 40.04%, 7.46%, 2.21%, and 0.09%. The fund is less weighted towards Below B (0.0%), B (0.0%), and US Government (0.0%) rated bonds.
The Energy Select Sector SPDR Fund (XLE) has a Treynor Ratio of -0.4 with a Beta of 1.54 and a R-squared of 61.84. Its Sharpe Ratio is 0.12 while XLE’s Standard Deviation is 27.52. Furthermore, the fund has a Mean Return of 0.32 and a Alpha of -11.98.
The iShares 1-5 Year Investment Grade Corporate Bond ETF (IGSB) has a Treynor Ratio of 4.82 with a Mean Return of 0.19 and a R-squared of 26.13. Its Standard Deviation is 2 while IGSB’s Sharpe Ratio is 0.82. Furthermore, the fund has a Beta of 0.34 and a Alpha of 0.69.
XLE’s Mean Return is 0.13 points higher than that of IGSB and its R-squared is 35.71 points higher. With a Standard Deviation of 27.52, XLE is slightly more volatile than IGSB. The Alpha and Beta of XLE are 12.67 points lower and 1.20 points higher than IGSB’s Alpha and Beta.
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 2019 was the strongest year for IGSB, returning 7.01% on an annual basis. The poorest year for IGSB in the last ten years was 2015, with a yield of 0.7%. Most years the iShares 1-5 Year Investment Grade Corporate Bond ETF has given investors modest returns, such as in 2011, 2017, and 2016, when gains were 1.34%, 1.41%, and 1.77% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
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 IGSB, the end total would have been $13,103. This equates to a $3,103 profit over 11 years and a compound annual growth rate (CAGR) of 2.51%.
XLE’s CAGR is 1.23 percentage points lower than that of IGSB and as a result, would have yielded $3,764 less on a $10,000 investment. Thus, XLE performed worse than IGSB by 1.23% annually.
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