The Financial Select Sector SPDR Fund (XLF) and the iShares Core Total USD Bond Market ETF (IUSB) are both among the Top 100 ETFs. XLF is a SPDR State Street Global Advisors Financial fund and IUSB is a iShares N/A fund. So, what’s the difference between XLF and IUSB? And which fund is better?
The expense ratio of XLF is 0.06 percentage points higher than IUSB’s (0.12% vs. 0.06%). XLF also has a high exposure to the financial services sector while IUSB is mostly comprised of AAA bonds. Overall, XLF has provided higher returns than IUSB over the past ten years.
In this article, we’ll compare XLF vs. IUSB. We’ll look at fund composition and risk metrics, as well as at their annual returns and portfolio growth. Moreover, I’ll also discuss XLF’s and IUSB’s industry exposure, performance, and holdings and examine how these affect their overall returns.
|Name||Financial Select Sector SPDR Fund||iShares Core Total USD Bond Market 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 Core Total USD Bond Market ETF (IUSB) is a N/A fund that is issued by iShares. It currently has 14.49B total assets under management and has yielded an average annual return of 4.13% over the past 10 years. The fund has a dividend yield of 2.1% with an expense ratio of 0.06%.
XLF’s dividend yield is 0.53% lower than that of IUSB (1.57% vs. 2.1%). Also, XLF yielded on average 8.04% more per year over the past decade (12.17% vs. 4.13%). The expense ratio of XLF is 0.06 percentage points higher than IUSB’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%.
|IUSB Bond Sectors||Weight|
IUSB’s Top Bond Sectors are ratings of AAA, BBB, A, BB, and AA at 58.32%, 16.98%, 12.27%, 4.33%, and 3.36%. The fund is less weighted towards B (2.8%), Others (1.01%), and Below B (0.92%) rated bonds.
The Financial Select Sector SPDR Fund (XLF) has a Alpha of 2.63 with a R-squared of 73.26 and a Mean Return of 1.21. Its Beta is 1.15 while XLF’s Standard Deviation is 18.86. Furthermore, the fund has a Sharpe Ratio of 0.74 and a Treynor Ratio of 11.25.
The iShares Core Total USD Bond Market ETF (IUSB) has a Standard Deviation of 0 with a Sharpe Ratio of 0 and a R-squared of 0. Its Alpha is 0 while IUSB’s Treynor Ratio is 0. Furthermore, the fund has a Mean Return of 0 and a Beta of 0.
XLF’s Mean Return is 1.21 points higher than that of IUSB and its R-squared is 73.26 points higher. With a Standard Deviation of 18.86, XLF is slightly more volatile than IUSB. The Alpha and Beta of XLF are 2.63 points higher and 1.15 points higher than IUSB’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 IUSB, returning 9.26% on an annual basis. The poorest year for IUSB in the last ten years was 2018, with a yield of -0.38%. Most years the iShares Core Total USD Bond Market ETF has given investors modest returns, such as in 2011, 2010, and 2015, when gains were 0.0%, 0.0%, and 0.46% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in XLF would have resulted in a final balance of $16,583. This is a profit of $6,583 over 6 years and amounts to a compound annual growth rate (CAGR) of 12.17%.
With a $10,000 investment in IUSB, the end total would have been $12,704. This equates to a $2,704 profit over 6 years and a compound annual growth rate (CAGR) of 4.13%.
XLF’s CAGR is 8.04 percentage points higher than that of IUSB and as a result, would have yielded $3,879 more on a $10,000 investment. Thus, XLF outperformed IUSB by 8.04% annually.
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