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XLE vs. SCHP: What’s The Difference?

The Energy Select Sector SPDR Fund (XLE) and the Schwab U.S. TIPS ETF (SCHP) are both among the Top 100 ETFs. XLE is a SPDR State Street Global Advisors Equity Energy fund and SCHP is a Schwab ETFs Inflation-Protected Bond fund. So, what’s the difference between XLE and SCHP? And which fund is better?

The expense ratio of XLE is 0.07 percentage points higher than SCHP’s (0.12% vs. 0.05%). XLE also has a high exposure to the energy sector while SCHP is mostly comprised of AAA bonds. Overall, XLE has provided lower returns than SCHP over the past 10 years.

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

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Summary

XLESCHP
NameEnergy Select Sector SPDR FundSchwab U.S. TIPS ETF
CategoryEquity EnergyInflation-Protected Bond
IssuerSPDR State Street Global AdvisorsSchwab ETFs
AUM25.55B18.41B
Avg. Return1.28%3.92%
Div. Yield3.92%1.97%
Expense Ratio0.12%0.05%

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. TIPS ETF (SCHP) is a Inflation-Protected Bond fund that is issued by Schwab ETFs. It currently has 18.41B total assets under management and has yielded an average annual return of 3.92% over the past 10 years. The fund has a dividend yield of 1.97% with an expense ratio of 0.05%.

XLE’s dividend yield is 1.95% higher than that of SCHP (3.92% vs. 1.97%). Also, XLE yielded on average 2.64% less per year over the past decade (1.28% vs. 3.92%). The expense ratio of XLE is 0.07 percentage points higher than SCHP’s (0.12% vs. 0.05%).

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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%.

SCHP - Holdings

SCHP Bond SectorsWeight
AAA100.0%
Others0.0%
Below B0.0%
B0.0%
BB0.0%
BBB0.0%
A0.0%
AA0.0%
US Government0.0%

SCHP’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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Risk Analysis

XLESCHP
Mean Return0.320.28
R-squared61.8466.16
Std. Deviation27.524.32
Alpha-11.98-0.5
Beta1.541.17
Sharpe Ratio0.120.64
Treynor Ratio-0.42.31

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

The Schwab U.S. TIPS ETF (SCHP) has a Treynor Ratio of 2.31 with a Standard Deviation of 4.32 and a Alpha of -0.5. Its R-squared is 66.16 while SCHP’s Beta is 1.17. Furthermore, the fund has a Mean Return of 0.28 and a Sharpe Ratio of 0.64.

XLE’s Mean Return is 0.04 points higher than that of SCHP and its R-squared is 4.32 points lower. With a Standard Deviation of 27.52, XLE is slightly more volatile than SCHP. The Alpha and Beta of XLE are 11.48 points lower and 0.37 points higher than SCHP’s Alpha and Beta.

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Performance

Annual Returns

XLE vs. SCHP - Annual Returns

YearXLESCHP
2020-32.56%10.94%
201911.87%8.36%
2018-18.1%-1.31%
2017-1.01%2.95%
201627.95%4.6%
2015-21.47%-1.5%
2014-8.61%3.56%
201326.16%-8.66%
20125.17%6.83%
20112.98%13.38%
201021.7%0.0%

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 SCHP, returning 13.38% on an annual basis. The poorest year for SCHP in the last ten years was 2013, with a yield of -8.66%. Most years the Schwab U.S. TIPS ETF has given investors modest returns, such as in 2017, 2014, and 2016, when gains were 2.95%, 3.56%, and 4.6% respectively.

Portfolio Growth

XLE vs. SCHP - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
XLE$10,000$7,6741.28%
SCHP$10,000$14,4183.92%

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 SCHP, the end total would have been $14,418. This equates to a $4,418 profit over 10 years and a compound annual growth rate (CAGR) of 3.92%.

XLE’s CAGR is 2.64 percentage points lower than that of SCHP and as a result, would have yielded $6,744 less on a $10,000 investment. Thus, XLE performed worse than SCHP by 2.64% annually.


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