The Financial Select Sector SPDR Fund (XLF) and the iShares U.S. Treasury Bond ETF (GOVT) are both among the Top 100 ETFs. XLF is a SPDR State Street Global Advisors Financial fund and GOVT is a iShares Intermediate Government fund. So, what’s the difference between XLF and GOVT? And which fund is better?
The expense ratio of XLF is 0.07 percentage points higher than GOVT’s (0.12% vs. 0.05%). XLF also has a high exposure to the financial services sector while GOVT is mostly comprised of AAA bonds. Overall, XLF has provided higher returns than GOVT over the past ten years.
In this article, we’ll compare XLF vs. GOVT. We’ll look at performance and holdings, as well as at their industry exposure and fund composition. Moreover, I’ll also discuss XLF’s and GOVT’s portfolio growth, annual returns, and risk metrics and examine how these affect their overall returns.
|Name||Financial Select Sector SPDR Fund||iShares U.S. Treasury Bond ETF|
|Issuer||SPDR State Street Global Advisors||iShares|
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 iShares U.S. Treasury Bond ETF (GOVT) is a Intermediate Government fund that is issued by iShares. It currently has 17.07B total assets under management and has yielded an average annual return of 2.67% over the past 10 years. The fund has a dividend yield of 1.0% with an expense ratio of 0.05%.
XLF’s dividend yield is 0.57% higher than that of GOVT (1.57% vs. 1.0%). Also, XLF yielded on average 9.49% more per year over the past decade (12.17% vs. 2.67%). The expense ratio of XLF is 0.07 percentage points higher than GOVT’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%.
|GOVT Bond Sectors||Weight|
GOVT’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.
The Financial Select Sector SPDR Fund (XLF) has a Alpha of 2.63 with a Beta of 1.15 and a Mean Return of 1.21. Its Sharpe Ratio is 0.74 while XLF’s R-squared is 73.26. Furthermore, the fund has a Treynor Ratio of 11.25 and a Standard Deviation of 18.86.
The iShares U.S. Treasury Bond ETF (GOVT) has a Beta of 0 with a R-squared of 0 and a Treynor Ratio of 0. Its Mean Return is 0 while GOVT’s Sharpe Ratio is 0. Furthermore, the fund has a Alpha of 0 and a Standard Deviation of 0.
XLF’s Mean Return is 1.21 points higher than that of GOVT and its R-squared is 73.26 points higher. With a Standard Deviation of 18.86, XLF is slightly more volatile than GOVT. The Alpha and Beta of XLF are 2.63 points higher and 1.15 points higher than GOVT’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 2020 was the strongest year for GOVT, returning 7.92% on an annual basis. The poorest year for GOVT in the last ten years was 2013, with a yield of -2.84%. Most years the iShares U.S. Treasury Bond ETF has given investors modest returns, such as in 2018, 2015, and 2016, when gains were 0.74%, 0.76%, and 0.92% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in XLF would have resulted in a final balance of $25,820. This is a profit of $15,820 over 8 years and amounts to a compound annual growth rate (CAGR) of 12.17%.
With a $10,000 investment in GOVT, the end total would have been $12,297. This equates to a $2,297 profit over 8 years and a compound annual growth rate (CAGR) of 2.67%.
XLF’s CAGR is 9.49 percentage points higher than that of GOVT and as a result, would have yielded $13,523 more on a $10,000 investment. Thus, XLF outperformed GOVT by 9.49% 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.