The Financial Select Sector SPDR Fund (XLF) and the Vanguard Short-Term Bond Index Fund ETF Shares (BSV) are both among the Top 100 ETFs. XLF is a SPDR State Street Global Advisors Financial fund and BSV is a Vanguard Short-Term Bond fund. So, what’s the difference between XLF and BSV? And which fund is better?
The expense ratio of XLF is 0.07 percentage points higher than BSV’s (0.12% vs. 0.05%). XLF also has a high exposure to the financial services sector while BSV is mostly comprised of AAA bonds. Overall, XLF has provided higher returns than BSV over the past ten years.
In this article, we’ll compare XLF vs. BSV. We’ll look at annual returns and risk metrics, as well as at their industry exposure and holdings. Moreover, I’ll also discuss XLF’s and BSV’s portfolio growth, fund composition, and performance and examine how these affect their overall returns.
|Name||Financial Select Sector SPDR Fund||Vanguard Short-Term Bond Index Fund ETF Shares|
|Issuer||SPDR State Street Global Advisors||Vanguard|
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 Vanguard Short-Term Bond Index Fund ETF Shares (BSV) is a Short-Term Bond fund that is issued by Vanguard. It currently has 67.71B total assets under management and has yielded an average annual return of 2.27% over the past 10 years. The fund has a dividend yield of 1.48% with an expense ratio of 0.05%.
XLF’s dividend yield is 0.09% higher than that of BSV (1.57% vs. 1.48%). Also, XLF yielded on average 9.89% more per year over the past decade (12.17% vs. 2.27%). The expense ratio of XLF is 0.07 percentage points higher than BSV’s (0.12% vs. 0.05%).
|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%.
|BSV Bond Sectors||Weight|
BSV’s Top Bond Sectors are ratings of AAA, BBB, A, AA, and Others at 71.65%, 13.08%, 11.95%, 3.28%, and 0.03%. The fund is less weighted towards Below B (0.01%), B (0.0%), and BB (0.0%) rated bonds.
The Financial Select Sector SPDR Fund (XLF) has a Mean Return of 1.21 with a Treynor Ratio of 11.25 and a Sharpe Ratio of 0.74. Its R-squared is 73.26 while XLF’s Standard Deviation is 18.86. Furthermore, the fund has a Beta of 1.15 and a Alpha of 2.63.
The Vanguard Short-Term Bond Index Fund ETF Shares (BSV) has a Standard Deviation of 1.33 with a Mean Return of 0.16 and a Sharpe Ratio of 0.98. Its Beta is 0.38 while BSV’s Alpha is 0.21. Furthermore, the fund has a R-squared of 78.38 and a Treynor Ratio of 3.33.
XLF’s Mean Return is 1.05 points higher than that of BSV and its R-squared is 5.12 points lower. With a Standard Deviation of 18.86, XLF is slightly more volatile than BSV. The Alpha and Beta of XLF are 2.42 points higher and 0.77 points higher than BSV’s Alpha and Beta.
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 2019 was the strongest year for BSV, returning 4.92% on an annual basis. The poorest year for BSV in the last ten years was 2013, with a yield of 0.17%. Most years the Vanguard Short-Term Bond Index Fund ETF Shares has given investors modest returns, such as in 2018, 2016, and 2012, when gains were 1.34%, 1.42%, and 1.98% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in XLF would have resulted in a final balance of $30,782. This is a profit of $20,782 over 11 years and amounts to a compound annual growth rate (CAGR) of 12.17%.
With a $10,000 investment in BSV, the end total would have been $12,785. This equates to a $2,785 profit over 11 years and a compound annual growth rate (CAGR) of 2.27%.
XLF’s CAGR is 9.89 percentage points higher than that of BSV and as a result, would have yielded $17,997 more on a $10,000 investment. Thus, XLF outperformed BSV by 9.89% annually.
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