XLF vs. DFAC: What’s The Difference?

The Financial Select Sector SPDR Fund (XLF) and the Dimensional U.S. Core Equity 2 ETF (DFAC) are both among the Top 100 ETFs. XLF is a SPDR State Street Global Advisors Financial fund and DFAC is a Dimensional Fund Advisors Large Blend fund. So, what’s the difference between XLF and DFAC? And which fund is better?

The expense ratio of XLF is 0.07 percentage points lower than DFAC’s (0.12% vs. 0.19%). XLF also has a higher exposure to the financial services sector and a higher standard deviation. Overall, XLF has provided lower returns than DFAC over the past ten years.

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

Summary

XLF DFAC
Name Financial Select Sector SPDR Fund Dimensional U.S. Core Equity 2 ETF
Category Financial Large Blend
Issuer SPDR State Street Global Advisors Dimensional Fund Advisors
AUM 40.81B 13.53B
Avg. Return 12.17% 13.93%
Div. Yield 1.57% 1.0%
Expense Ratio 0.12% 0.19%

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 Dimensional U.S. Core Equity 2 ETF (DFAC) is a Large Blend fund that is issued by Dimensional Fund Advisors. It currently has 13.53B total assets under management and has yielded an average annual return of 13.93% over the past 10 years. The fund has a dividend yield of 1.0% with an expense ratio of 0.19%.

XLF’s dividend yield is 0.57% higher than that of DFAC (1.57% vs. 1.0%). Also, XLF yielded on average 1.77% less per year over the past decade (12.17% vs. 13.93%). The expense ratio of XLF is 0.07 percentage points lower than DFAC’s (0.12% vs. 0.19%).

Fund Composition

Industry Exposure

XLF vs. DFAC - Industry Exposure

XLF DFAC
Technology 0.0% 22.81%
Industrials 0.0% 14.13%
Energy 0.0% 2.67%
Communication Services 0.0% 7.63%
Utilities 0.0% 1.54%
Healthcare 0.0% 12.09%
Consumer Defensive 0.0% 5.94%
Real Estate 0.0% 0.37%
Financial Services 100.0% 16.17%
Consumer Cyclical 0.0% 13.09%
Basic Materials 0.0% 3.56%

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 Dimensional U.S. Core Equity 2 ETF (DFAC) has the most exposure to the Technology sector at 22.81%. This is followed by Financial Services and Industrials at 16.17% and 14.13% respectively. Utilities (1.54%), Energy (2.67%), and Basic Materials (3.56%) only make up 7.77% of the fund’s total assets.

DFAC’s mid-section with moderate exposure is comprised of Consumer Defensive, Communication Services, Healthcare, Consumer Cyclical, and Industrials stocks at 5.94%, 7.63%, 12.09%, 13.09%, and 14.13%.

XLF is 83.83% more exposed to the Financial Services sector than DFAC (100.0% vs 16.17%). XLF’s exposure to Technology and Industrials stocks is 22.81% lower and 14.13% lower respectively (0.0% vs. 22.81% and 0.0% vs. 14.13%). In total, Consumer Cyclical, Real Estate, and Consumer Defensive also make up 19.40% less of the fund’s holdings compared to DFAC (0.00% vs. 19.40%).

Holdings

XLF - Holdings

XLF Holdings Weight
Berkshire Hathaway Inc Class B 12.83%
JPMorgan Chase & Co 11.47%
Bank of America Corp 7.57%
Wells Fargo & Co 4.56%
Citigroup Inc 3.56%
Morgan Stanley 3.32%
Goldman Sachs Group Inc 3.15%
BlackRock Inc 3.02%
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%.

DFAC - Holdings

DFAC Holdings Weight
Apple Inc 4.7%
Microsoft Corp 3.81%
Amazon.com Inc 2.39%
Johnson & Johnson 1.05%
Facebook Inc Class A 1.05%
JPMorgan Chase & Co 1.0%
Alphabet Inc Class C 0.85%
Alphabet Inc Class A 0.84%
Berkshire Hathaway Inc Class B 0.75%
Visa Inc Class A 0.74%

DFAC’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Johnson & Johnson, and Facebook Inc Class A at 4.7%, 3.81%, 2.39%, 1.05%, and 1.05%.

JPMorgan Chase & Co (1.0%), Alphabet Inc Class C (0.85%), and Alphabet Inc Class A (0.84%) have a slightly smaller but still significant weight. Berkshire Hathaway Inc Class B and Visa Inc Class A are also represented in the DFAC’s holdings at 0.75% and 0.74%.

Risk Analysis

XLF DFAC
Mean Return 1.21 1.19
R-squared 73.26 95.1
Std. Deviation 18.86 15.55
Alpha 2.63 -2.75
Beta 1.15 1.12
Sharpe Ratio 0.74 0.88
Treynor Ratio 11.25 11.85

The Financial Select Sector SPDR Fund (XLF) has a Alpha of 2.63 with a Treynor Ratio of 11.25 and a R-squared of 73.26. Its Sharpe Ratio is 0.74 while XLF’s Mean Return is 1.21. Furthermore, the fund has a Standard Deviation of 18.86 and a Beta of 1.15.

The Dimensional U.S. Core Equity 2 ETF (DFAC) has a Alpha of -2.75 with a Standard Deviation of 15.55 and a Beta of 1.12. Its Sharpe Ratio is 0.88 while DFAC’s R-squared is 95.1. Furthermore, the fund has a Mean Return of 1.19 and a Treynor Ratio of 11.85.

XLF’s Mean Return is 0.02 points higher than that of DFAC and its R-squared is 21.84 points lower. With a Standard Deviation of 18.86, XLF is slightly more volatile than DFAC. The Alpha and Beta of XLF are 5.38 points higher and 0.03 points higher than DFAC’s Alpha and Beta.

Performance

Annual Returns

XLF vs. DFAC - Annual Returns

Year XLF DFAC
2020 -1.68% 15.8%
2019 31.88% 29.54%
2018 -13.09% -9.43%
2017 22.03% 18.82%
2016 22.55% 16.31%
2015 -1.6% -2.53%
2014 15.02% 9.56%
2013 35.37% 37.55%
2012 28.53% 17.93%
2011 -17.16% -1.96%
2010 11.97% 21.67%

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 2013 was the strongest year for DFAC, returning 37.55% on an annual basis. The poorest year for DFAC in the last ten years was 2018, with a yield of -9.43%. Most years the Dimensional U.S. Core Equity 2 ETF has given investors modest returns, such as in 2020, 2016, and 2012, when gains were 15.8%, 16.31%, and 17.93% respectively.

Portfolio Growth

XLF vs. DFAC - Portfolio Growth

Fund Initial Balance Final Balance CAGR
XLF $10,000 $30,782 12.17%
DFAC $10,000 $38,796 13.93%

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 DFAC, the end total would have been $38,796. This equates to a $28,796 profit over 11 years and a compound annual growth rate (CAGR) of 13.93%.

XLF’s CAGR is 1.77 percentage points lower than that of DFAC and as a result, would have yielded $8,014 less on a $10,000 investment. Thus, XLF performed worse than DFAC by 1.77% annually.


Current recommendations:

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) 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!

2) 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!).

3) If you are interested in crypto, check out Gemini. I've started allocating a small amount of assets to the growing crypto space and Gemini has just been a breeze to use. Once you register, make sure to also open an Active Trader account to buy crypto at the lowest fees on the market (just 0.03%!).

To see all of my most up-to-date recommendations, check out the Recommended Tools section.

Leave a Reply