The Financial Select Sector SPDR Fund (XLF) and the iShares 1-5 Year Investment Grade Corporate Bond ETF (IGSB) are both among the Top 100 ETFs. XLF is a SPDR State Street Global Advisors Financial fund and IGSB is a iShares Short-Term Bond fund. So, what’s the difference between XLF and IGSB? And which fund is better?
The expense ratio of XLF is 0.06 percentage points higher than IGSB’s (0.12% vs. 0.06%). XLF also has a high exposure to the financial services sector while IGSB is mostly comprised of BBB bonds. Overall, XLF has provided higher returns than IGSB over the past ten years.
In this article, we’ll compare XLF vs. IGSB. We’ll look at portfolio growth and fund composition, as well as at their annual returns and holdings. Moreover, I’ll also discuss XLF’s and IGSB’s industry exposure, performance, and risk metrics and examine how these affect their overall returns.
|Name||Financial Select Sector SPDR Fund||iShares 1-5 Year Investment Grade Corporate 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 1-5 Year Investment Grade Corporate Bond ETF (IGSB) is a Short-Term Bond fund that is issued by iShares. It currently has 26.63B total assets under management and has yielded an average annual return of 2.51% over the past 10 years. The fund has a dividend yield of 2.02% with an expense ratio of 0.06%.
XLF’s dividend yield is 0.45% lower than that of IGSB (1.57% vs. 2.02%). Also, XLF yielded on average 9.66% more per year over the past decade (12.17% vs. 2.51%). The expense ratio of XLF is 0.06 percentage points higher than IGSB’s (0.12% vs. 0.06%).
|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%.
|IGSB Bond Sectors||Weight|
IGSB’s Top Bond Sectors are ratings of BBB, A, AA, AAA, and BB at 50.48%, 40.04%, 7.46%, 2.21%, and 0.09%. The fund is less weighted towards Below B (0.0%), B (0.0%), and US Government (0.0%) rated bonds.
The Financial Select Sector SPDR Fund (XLF) has a Mean Return of 1.21 with a Sharpe Ratio of 0.74 and a Standard Deviation of 18.86. Its Alpha is 2.63 while XLF’s Beta is 1.15. Furthermore, the fund has a Treynor Ratio of 11.25 and a R-squared of 73.26.
The iShares 1-5 Year Investment Grade Corporate Bond ETF (IGSB) has a R-squared of 26.13 with a Mean Return of 0.19 and a Sharpe Ratio of 0.82. Its Standard Deviation is 2 while IGSB’s Beta is 0.34. Furthermore, the fund has a Alpha of 0.69 and a Treynor Ratio of 4.82.
XLF’s Mean Return is 1.02 points higher than that of IGSB and its R-squared is 47.13 points higher. With a Standard Deviation of 18.86, XLF is slightly more volatile than IGSB. The Alpha and Beta of XLF are 1.94 points higher and 0.81 points higher than IGSB’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 IGSB, returning 7.01% on an annual basis. The poorest year for IGSB in the last ten years was 2015, with a yield of 0.7%. Most years the iShares 1-5 Year Investment Grade Corporate Bond ETF has given investors modest returns, such as in 2011, 2017, and 2016, when gains were 1.34%, 1.41%, and 1.77% 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 IGSB, the end total would have been $13,103. This equates to a $3,103 profit over 11 years and a compound annual growth rate (CAGR) of 2.51%.
XLF’s CAGR is 9.66 percentage points higher than that of IGSB and as a result, would have yielded $17,679 more on a $10,000 investment. Thus, XLF outperformed IGSB by 9.66% annually.
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