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XLF vs. IAU: What’s The Difference?

The Financial Select Sector SPDR Fund (XLF) and the iShares Gold Trust (IAU) are both among the Top 100 ETFs. XLF is a SPDR State Street Global Advisors Financial fund and IAU is a iShares N/A fund. So, what’s the difference between XLF and IAU? And which fund is better?

The expense ratio of XLF is 0.13 percentage points lower than IAU’s (0.12% vs. 0.25%). XLF also has a higher exposure to the financial services sector and a higher standard deviation. Overall, XLF has provided higher returns than IAU over the past ten years.

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

Introduction To Mutual Funds
Introduction To Mutual Funds
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Summary

XLFIAU
NameFinancial Select Sector SPDR FundiShares Gold Trust
CategoryFinancialN/A
IssuerSPDR State Street Global AdvisorsiShares
AUM40.81B28.61B
Avg. Return12.17%6.03%
Div. Yield1.57%0.0%
Expense Ratio0.12%0.25%

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 Gold Trust (IAU) is a N/A fund that is issued by iShares. It currently has 28.61B total assets under management and has yielded an average annual return of 6.03% over the past 10 years. The fund has a dividend yield of 0.0% with an expense ratio of 0.25%.

XLF’s dividend yield is 1.57% higher than that of IAU (1.57% vs. 0.0%). Also, XLF yielded on average 6.13% more per year over the past decade (12.17% vs. 6.03%). The expense ratio of XLF is 0.13 percentage points lower than IAU’s (0.12% vs. 0.25%).

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Fund Composition

Industry Exposure

XLF vs. IAU - Industry Exposure

XLFIAU
Technology0.0%0.0%
Industrials0.0%0.0%
Energy0.0%0.0%
Communication Services0.0%0.0%
Utilities0.0%0.0%
Healthcare0.0%0.0%
Consumer Defensive0.0%0.0%
Real Estate0.0%0.0%
Financial Services100.0%0.0%
Consumer Cyclical0.0%0.0%
Basic Materials0.0%0.0%

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 iShares Gold Trust (IAU) has the most exposure to the Technology sector at 0.0%. This is followed by Industrials and Energy at 0.0% and 0.0% respectively. Consumer Cyclical (0.0%), Financial Services (0.0%), and Real Estate (0.0%) only make up 0.00% of the fund’s total assets.

IAU’s mid-section with moderate exposure is comprised of Consumer Defensive, Healthcare, Utilities, Communication Services, and Energy stocks at 0.0%, 0.0%, 0.0%, 0.0%, and 0.0%.

XLF is 100.00% more exposed to the Financial Services sector than IAU (100.0% vs 0.0%). XLF’s exposure to Technology and Industrials stocks is 0.00% lower and 0.00% lower respectively (0.0% vs. 0.0% and 0.0% vs. 0.0%). In total, Consumer Cyclical, Real Estate, and Consumer Defensive also make up 0.00% less of the fund’s holdings compared to IAU (0.00% vs. 0.00%).

Holdings

XLF - Holdings

XLF HoldingsWeight
Berkshire Hathaway Inc Class B12.83%
JPMorgan Chase & Co11.47%
Bank of America Corp7.57%
Wells Fargo & Co4.56%
Citigroup Inc3.56%
Morgan Stanley3.32%
Goldman Sachs Group Inc3.15%
BlackRock Inc3.02%
Charles Schwab Corp2.66%
American Express Co2.62%

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%.

IAU - Holdings

IAU HoldingsWeight
Gold100.0%
N/A0%
N/A0%
N/A0%
N/A0%
N/A0%
N/A0%
N/A0%
N/A0%
N/A0%

IAU’s Top Holdings are Gold, N/A, N/A, N/A, and N/A at 100.0%, 0%, 0%, 0%, and 0%.

N/A (0%), N/A (0%), and N/A (0%) have a slightly smaller but still significant weight. N/A and N/A are also represented in the IAU’s holdings at 0% and 0%.

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Risk Analysis

XLFIAU
Mean Return1.210.23
R-squared73.2616.03
Std. Deviation18.8616.97
Alpha2.634.16
Beta1.150.48
Sharpe Ratio0.740.13
Treynor Ratio11.251.5

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

The iShares Gold Trust (IAU) has a Mean Return of 0.23 with a R-squared of 16.03 and a Sharpe Ratio of 0.13. Its Beta is 0.48 while IAU’s Standard Deviation is 16.97. Furthermore, the fund has a Alpha of 4.16 and a Treynor Ratio of 1.5.

XLF’s Mean Return is 0.98 points higher than that of IAU and its R-squared is 57.23 points higher. With a Standard Deviation of 18.86, XLF is slightly more volatile than IAU. The Alpha and Beta of XLF are 1.53 points lower and 0.67 points higher than IAU’s Alpha and Beta.

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Performance

Annual Returns

XLF vs. IAU - Annual Returns

YearXLFIAU
2020-1.68%23.86%
201931.88%18.54%
2018-13.09%-1.39%
201722.03%11.58%
201622.55%8.85%
2015-1.6%-11.65%
201415.02%-0.44%
201335.37%-27.96%
201228.53%8.37%
2011-17.16%8.66%
201011.97%27.93%

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 2010 was the strongest year for IAU, returning 27.93% on an annual basis. The poorest year for IAU in the last ten years was 2013, with a yield of -27.96%. Most years the iShares Gold Trust has given investors modest returns, such as in 2012, 2011, and 2016, when gains were 8.37%, 8.66%, and 8.85% respectively.

Portfolio Growth

XLF vs. IAU - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
XLF$10,000$30,78212.17%
IAU$10,000$16,7866.03%

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 IAU, the end total would have been $16,786. This equates to a $6,786 profit over 11 years and a compound annual growth rate (CAGR) of 6.03%.

XLF’s CAGR is 6.13 percentage points higher than that of IAU and as a result, would have yielded $13,996 more on a $10,000 investment. Thus, XLF outperformed IAU by 6.13% annually.


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