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XLE vs. MUB: What’s The Difference?

The Energy Select Sector SPDR Fund (XLE) and the iShares National Muni Bond ETF (MUB) are both among the Top 100 ETFs. XLE is a SPDR State Street Global Advisors Equity Energy fund and MUB is a iShares Muni National Interm fund. So, what’s the difference between XLE and MUB? And which fund is better?

The expense ratio of XLE is 0.05 percentage points higher than MUB’s (0.12% vs. 0.07%). XLE also has a high exposure to the energy sector while MUB is mostly comprised of AA bonds. Overall, XLE has provided lower returns than MUB over the past 11 years.

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

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Summary

XLEMUB
NameEnergy Select Sector SPDR FundiShares National Muni Bond ETF
CategoryEquity EnergyMuni National Interm
IssuerSPDR State Street Global AdvisorsiShares
AUM25.55B22.71B
Avg. Return1.28%4.04%
Div. Yield3.92%1.96%
Expense Ratio0.12%0.07%

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 National Muni Bond ETF (MUB) is a Muni National Interm fund that is issued by iShares. It currently has 22.71B total assets under management and has yielded an average annual return of 4.04% over the past 10 years. The fund has a dividend yield of 1.96% with an expense ratio of 0.07%.

XLE’s dividend yield is 1.96% higher than that of MUB (3.92% vs. 1.96%). Also, XLE yielded on average 2.76% less per year over the past decade (1.28% vs. 4.04%). The expense ratio of XLE is 0.05 percentage points higher than MUB’s (0.12% vs. 0.07%).

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Fund Composition

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%.

MUB - Holdings

MUB Bond SectorsWeight
AA60.38%
AAA18.39%
A15.04%
BBB6.0%
Others0.17%
BB0.02%
Below B0.0%
B0.0%
US Government0.0%

MUB’s Top Bond Sectors are ratings of AA, AAA, A, BBB, and Others at 60.38%, 18.39%, 15.04%, 6.0%, and 0.17%. The fund is less weighted towards BB (0.02%), Below B (0.0%), and B (0.0%) rated bonds.

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Risk Analysis

XLEMUB
Mean Return0.320.32
R-squared61.8499
Std. Deviation27.523.68
Alpha-11.98-0.46
Beta1.541.01
Sharpe Ratio0.120.88
Treynor Ratio-0.43.2

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

The iShares National Muni Bond ETF (MUB) has a Beta of 1.01 with a Mean Return of 0.32 and a Alpha of -0.46. Its Sharpe Ratio is 0.88 while MUB’s R-squared is 99. Furthermore, the fund has a Treynor Ratio of 3.2 and a Standard Deviation of 3.68.

XLE’s Mean Return is 0.00 points lower than that of MUB and its R-squared is 37.16 points lower. With a Standard Deviation of 27.52, XLE is slightly more volatile than MUB. The Alpha and Beta of XLE are 11.52 points lower and 0.53 points higher than MUB’s Alpha and Beta.

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Performance

Annual Returns

XLE vs. MUB - Annual Returns

YearXLEMUB
2020-32.56%4.87%
201911.87%7.28%
2018-18.1%0.86%
2017-1.01%4.61%
201627.95%0.06%
2015-21.47%2.99%
2014-8.61%8.61%
201326.16%-3.26%
20125.17%6.14%
20112.98%10.85%
201021.7%1.4%

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 2011 was the strongest year for MUB, returning 10.85% on an annual basis. The poorest year for MUB in the last ten years was 2013, with a yield of -3.26%. Most years the iShares National Muni Bond ETF has given investors modest returns, such as in 2015, 2017, and 2020, when gains were 2.99%, 4.61%, and 4.87% respectively.

Portfolio Growth

XLE vs. MUB - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
XLE$10,000$9,3391.28%
MUB$10,000$15,3334.04%

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 MUB, the end total would have been $15,333. This equates to a $5,333 profit over 11 years and a compound annual growth rate (CAGR) of 4.04%.

XLE’s CAGR is 2.76 percentage points lower than that of MUB and as a result, would have yielded $5,994 less on a $10,000 investment. Thus, XLE performed worse than MUB by 2.76% annually.


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