The Energy Select Sector SPDR Fund (XLE) and the Schwab U.S. Broad Market ETF (SCHB) are both among the Top 100 ETFs. XLE is a SPDR State Street Global Advisors Equity Energy fund and SCHB is a Schwab ETFs Large Blend fund. So, what’s the difference between XLE and SCHB? And which fund is better?
The expense ratio of XLE is 0.09 percentage points higher than SCHB’s (0.12% vs. 0.03%). XLE also has a higher exposure to the energy sector and a higher standard deviation. Overall, XLE has provided lower returns than SCHB over the past 10 years.
In this article, we’ll compare XLE vs. SCHB. We’ll look at industry exposure and fund composition, as well as at their portfolio growth and holdings. Moreover, I’ll also discuss XLE’s and SCHB’s performance, risk metrics, and annual returns and examine how these affect their overall returns.
|Name||Energy Select Sector SPDR Fund||Schwab U.S. Broad Market ETF|
|Category||Equity Energy||Large Blend|
|Issuer||SPDR State Street Global Advisors||Schwab ETFs|
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 Schwab U.S. Broad Market ETF (SCHB) is a Large Blend fund that is issued by Schwab ETFs. It currently has 21.44B total assets under management and has yielded an average annual return of 14.43% over the past 10 years. The fund has a dividend yield of 1.39% with an expense ratio of 0.03%.
XLE’s dividend yield is 2.53% higher than that of SCHB (3.92% vs. 1.39%). Also, XLE yielded on average 13.15% less per year over the past decade (1.28% vs. 14.43%). The expense ratio of XLE is 0.09 percentage points higher than SCHB’s (0.12% vs. 0.03%).
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 Schwab U.S. Broad Market ETF (SCHB) has the most exposure to the Technology sector at 24.15%. This is followed by Financial Services and Healthcare at 13.88% and 13.37% respectively. Basic Materials (2.45%), Energy (2.78%), and Real Estate (3.58%) only make up 8.81% of the fund’s total assets.
SCHB’s mid-section with moderate exposure is comprised of Consumer Defensive, Industrials, Communication Services, Consumer Cyclical, and Healthcare stocks at 5.76%, 9.29%, 10.52%, 11.9%, and 13.37%.
XLE is 97.22% more exposed to the Energy sector than SCHB (100.0% vs 2.78%). XLE’s exposure to Technology and Industrials stocks is 24.15% lower and 9.29% lower respectively (0.0% vs. 24.15% and 0.0% vs. 9.29%). In total, Consumer Cyclical, Financial Services, and Real Estate also make up 29.36% less of the fund’s holdings compared to SCHB (0.00% vs. 29.36%).
|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%.
|Facebook Inc A||1.88%|
|Alphabet Inc A||1.66%|
|Alphabet Inc Class C||1.61%|
|Berkshire Hathaway Inc Class B||1.19%|
|JPMorgan Chase & Co||1.06%|
SCHB’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc A, and Alphabet Inc A at 4.86%, 4.61%, 3.33%, 1.88%, and 1.66%.
Alphabet Inc Class C (1.61%), Berkshire Hathaway Inc Class B (1.19%), and Tesla Inc (1.18%) have a slightly smaller but still significant weight. NVIDIA Corp and JPMorgan Chase & Co are also represented in the SCHB’s holdings at 1.13% and 1.06%.
The Energy Select Sector SPDR Fund (XLE) has a Beta of 1.54 with a Mean Return of 0.32 and a Treynor Ratio of -0.4. Its Sharpe Ratio is 0.12 while XLE’s Standard Deviation is 27.52. Furthermore, the fund has a Alpha of -11.98 and a R-squared of 61.84.
The Schwab U.S. Broad Market ETF (SCHB) has a R-squared of 99.33 with a Alpha of -0.58 and a Standard Deviation of 14.12. Its Sharpe Ratio is 1 while SCHB’s Mean Return is 1.23. Furthermore, the fund has a Beta of 1.04 and a Treynor Ratio of 13.58.
XLE’s Mean Return is 0.91 points lower than that of SCHB and its R-squared is 37.49 points lower. With a Standard Deviation of 27.52, XLE is slightly more volatile than SCHB. The Alpha and Beta of XLE are 11.40 points lower and 0.50 points higher than SCHB’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 2013 was the strongest year for SCHB, returning 33.37% on an annual basis. The poorest year for SCHB in the last ten years was 2018, with a yield of -5.25%. Most years the Schwab U.S. Broad Market ETF has given investors modest returns, such as in 2014, 2012, and 2010, when gains were 12.67%, 16.22%, and 17.1% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in XLE would have resulted in a final balance of $7,674. This is a profit of $-2,326 over 10 years and amounts to a compound annual growth rate (CAGR) of 1.28%.
With a $10,000 investment in SCHB, the end total would have been $36,354. This equates to a $26,354 profit over 10 years and a compound annual growth rate (CAGR) of 14.43%.
XLE’s CAGR is 13.15 percentage points lower than that of SCHB and as a result, would have yielded $28,680 less on a $10,000 investment. Thus, XLE performed worse than SCHB by 13.15% 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.