The Financial Select Sector SPDR Fund (XLF) and the ARK Innovation ETF (ARKK) are both among the Top 100 ETFs. XLF is a SPDR State Street Global Advisors Financial fund and ARKK is a ARK ETF Trust Mid-Cap Growth fund. So, what’s the difference between XLF and ARKK? And which fund is better?
The expense ratio of XLF is 0.63 percentage points lower than ARKK’s (0.12% vs. 0.75%). XLF also has a higher exposure to the financial services sector and a higher standard deviation. Overall, XLF has provided lower returns than ARKK over the past ten years.
In this article, we’ll compare XLF vs. ARKK. We’ll look at performance and holdings, as well as at their industry exposure and annual returns. Moreover, I’ll also discuss XLF’s and ARKK’s risk metrics, portfolio growth, and fund composition and examine how these affect their overall returns.
|Name||Financial Select Sector SPDR Fund||ARK Innovation ETF|
|Issuer||SPDR State Street Global Advisors||ARK ETF Trust|
The Financial Select Sector SPDR Fund (XLF) is a Financial fund that is issued by SPDR State Street Global Advisors. It currently has 40.81B total assets under management and has yielded an average annual return of 12.17% over the past 10 years. The fund has a dividend yield of 1.57% with an expense ratio of 0.12%.
The ARK Innovation ETF (ARKK) is a Mid-Cap Growth fund that is issued by ARK ETF Trust. It currently has 25.52B total assets under management and has yielded an average annual return of 55.45% over the past 10 years. The fund has a dividend yield of 0.0% with an expense ratio of 0.75%.
XLF’s dividend yield is 1.57% higher than that of ARKK (1.57% vs. 0.0%). Also, XLF yielded on average 43.28% less per year over the past decade (12.17% vs. 55.45%). The expense ratio of XLF is 0.63 percentage points lower than ARKK’s (0.12% vs. 0.75%).
FYI: The best way I've found to invest in ETFs is through M1 Finance. It's free and you even get an instant line of credit! Have a look here (link to M1 Finance).
The Financial Select Sector SPDR Fund (XLF) has the most exposure to the Financial Services sector at 100.0%. This is followed by Technology and Industrials at 0.0% and 0.0% respectively. Consumer Cyclical (0.0%), Real Estate (0.0%), and Consumer Defensive (0.0%) only make up 0.00% of the fund’s total assets.
XLF’s mid-section with moderate exposure is comprised of Healthcare, Utilities, Communication Services, Energy, and Industrials stocks at 0.0%, 0.0%, 0.0%, 0.0%, and 0.0%.
The ARK Innovation ETF (ARKK) has the most exposure to the Technology sector at 30.5%. This is followed by Healthcare and Communication Services at 29.47% and 25.01% respectively. Utilities (0.0%), Energy (0.0%), and Financial Services (0.04%) only make up 0.04% of the fund’s total assets.
ARKK’s mid-section with moderate exposure is comprised of Real Estate, Consumer Defensive, Industrials, Consumer Cyclical, and Communication Services stocks at 0.51%, 0.93%, 2.11%, 11.42%, and 25.01%.
XLF is 99.96% more exposed to the Financial Services sector than ARKK (100.0% vs 0.04%). XLF’s exposure to Technology and Industrials stocks is 30.50% lower and 2.11% lower respectively (0.0% vs. 30.5% and 0.0% vs. 2.11%). In total, Consumer Cyclical, Real Estate, and Consumer Defensive also make up 12.86% less of the fund’s holdings compared to ARKK (0.00% vs. 12.86%).
|Berkshire Hathaway Inc Class B||12.83%|
|JPMorgan Chase & Co||11.47%|
|Bank of America Corp||7.57%|
|Wells Fargo & Co||4.56%|
|Goldman Sachs Group Inc||3.15%|
|Charles Schwab Corp||2.66%|
|American Express Co||2.62%|
XLF’s Top Holdings are Berkshire Hathaway Inc Class B, JPMorgan Chase & Co, Bank of America Corp, Wells Fargo & Co, and Citigroup Inc at 12.83%, 11.47%, 7.57%, 4.56%, and 3.56%.
Morgan Stanley (3.32%), Goldman Sachs Group Inc (3.15%), and BlackRock Inc (3.02%) have a slightly smaller but still significant weight. Charles Schwab Corp and American Express Co are also represented in the XLF’s holdings at 2.66% and 2.62%.
|Roku Inc Class A||6.48%|
|Teladoc Health Inc||5.76%|
|Square Inc A||4.37%|
|Zoom Video Communications Inc||4.36%|
|Shopify Inc A||4.27%|
|Spotify Technology SA||3.68%|
|Twilio Inc A||3.66%|
|Coinbase Global Inc Ordinary Shares – Class A||3.65%|
|Unity Software Inc Ordinary Shares||3.41%|
ARKK’s Top Holdings are Tesla Inc, Roku Inc Class A, Teladoc Health Inc, Square Inc A, and Zoom Video Communications Inc at 9.56%, 6.48%, 5.76%, 4.37%, and 4.36%.
Shopify Inc A (4.27%), Spotify Technology SA (3.68%), and Twilio Inc A (3.66%) have a slightly smaller but still significant weight. Coinbase Global Inc Ordinary Shares – Class A and Unity Software Inc Ordinary Shares are also represented in the ARKK’s holdings at 3.65% and 3.41%.
NOTE: The easiest way to add diversification to your portfolio is to invest in real estate through Fundrise. You can become private real estate investor without the burden of property management! Check it out here (link to Fundrise).
The Financial Select Sector SPDR Fund (XLF) has a Treynor Ratio of 11.25 with a Alpha of 2.63 and a Mean Return of 1.21. Its R-squared is 73.26 while XLF’s Sharpe Ratio is 0.74. Furthermore, the fund has a Beta of 1.15 and a Standard Deviation of 18.86.
The ARK Innovation ETF (ARKK) has a R-squared of 0 with a Treynor Ratio of 0 and a Alpha of 0. Its Sharpe Ratio is 0 while ARKK’s Mean Return is 0. Furthermore, the fund has a Standard Deviation of 0 and a Beta of 0.
XLF’s Mean Return is 1.21 points higher than that of ARKK and its R-squared is 73.26 points higher. With a Standard Deviation of 18.86, XLF is slightly more volatile than ARKK. The Alpha and Beta of XLF are 2.63 points higher and 1.15 points higher than ARKK’s Alpha and Beta.
FYI: Another great way to get exposure to the real estate sector is by investing in real estate debt. Groundfloor offers fantastic short-term, high-yield bonds that can add diversification to your portfolio!
XLF had its best year in 2013 with an annual return of 35.37%. XLF’s worst year over the past decade yielded -17.16% and occurred in 2011. In most years the Financial Select Sector SPDR Fund provided moderate returns such as in 2010, 2014, and 2017 where annual returns amounted to 11.97%, 15.02%, and 22.03% respectively.
The year 2020 was the strongest year for ARKK, returning 152.52% on an annual basis. The poorest year for ARKK in the last ten years was 2016, with a yield of -1.96%. Most years the ARK Innovation ETF has given investors modest returns, such as in 2011, 2010, and 2018, when gains were 0.0%, 0.0%, and 3.58% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in XLF would have resulted in a final balance of $16,852. This is a profit of $6,852 over 5 years and amounts to a compound annual growth rate (CAGR) of 12.17%.
With a $10,000 investment in ARKK, the end total would have been $65,218. This equates to a $55,218 profit over 5 years and a compound annual growth rate (CAGR) of 55.45%.
XLF’s CAGR is 43.28 percentage points lower than that of ARKK and as a result, would have yielded $48,366 less on a $10,000 investment. Thus, XLF performed worse than ARKK by 43.28% 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.