XLF vs. MDY: What’s The Difference?

The Financial Select Sector SPDR Fund (XLF) and the SPDR S&P MIDCAP 400 ETF Trust (MDY) are both among the Top 100 ETFs. XLF is a SPDR State Street Global Advisors Financial fund and MDY is a SPDR State Street Global Advisors Mid-Cap Blend fund. So, what’s the difference between XLF and MDY? And which fund is better?

The expense ratio of XLF is 0.11 percentage points lower than MDY’s (0.12% vs. 0.23%). XLF also has a higher exposure to the financial services sector and a higher standard deviation. Overall, XLF has provided lower returns than MDY over the past ten years.

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

Summary

XLF MDY
Name Financial Select Sector SPDR Fund SPDR S&P MIDCAP 400 ETF Trust
Category Financial Mid-Cap Blend
Issuer SPDR State Street Global Advisors SPDR State Street Global Advisors
AUM 40.81B 21.31B
Avg. Return 12.17% 13.29%
Div. Yield 1.57% 0.94%
Expense Ratio 0.12% 0.23%

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 SPDR S&P MIDCAP 400 ETF Trust (MDY) is a Mid-Cap Blend fund that is issued by SPDR State Street Global Advisors. It currently has 21.31B total assets under management and has yielded an average annual return of 13.29% over the past 10 years. The fund has a dividend yield of 0.94% with an expense ratio of 0.23%.

XLF’s dividend yield is 0.63% higher than that of MDY (1.57% vs. 0.94%). Also, XLF yielded on average 1.12% less per year over the past decade (12.17% vs. 13.29%). The expense ratio of XLF is 0.11 percentage points lower than MDY’s (0.12% vs. 0.23%).

Fund Composition

Industry Exposure

XLF vs. MDY - Industry Exposure

XLF MDY
Technology 0.0% 14.74%
Industrials 0.0% 17.88%
Energy 0.0% 2.52%
Communication Services 0.0% 1.63%
Utilities 0.0% 2.84%
Healthcare 0.0% 11.17%
Consumer Defensive 0.0% 4.2%
Real Estate 0.0% 9.66%
Financial Services 100.0% 15.2%
Consumer Cyclical 0.0% 14.89%
Basic Materials 0.0% 5.27%

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 SPDR S&P MIDCAP 400 ETF Trust (MDY) has the most exposure to the Industrials sector at 17.88%. This is followed by Financial Services and Consumer Cyclical at 15.2% and 14.89% respectively. Energy (2.52%), Utilities (2.84%), and Consumer Defensive (4.2%) only make up 9.56% of the fund’s total assets.

MDY’s mid-section with moderate exposure is comprised of Basic Materials, Real Estate, Healthcare, Technology, and Consumer Cyclical stocks at 5.27%, 9.66%, 11.17%, 14.74%, and 14.89%.

XLF is 84.80% more exposed to the Financial Services sector than MDY (100.0% vs 15.2%). XLF’s exposure to Technology and Industrials stocks is 14.74% lower and 17.88% lower respectively (0.0% vs. 14.74% and 0.0% vs. 17.88%). In total, Consumer Cyclical, Real Estate, and Consumer Defensive also make up 28.75% less of the fund’s holdings compared to MDY (0.00% vs. 28.75%).

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%.

MDY - Holdings

MDY Holdings Weight
Bio-Techne Corp 0.75%
Molina Healthcare Inc 0.63%
Cognex Corp 0.63%
Fair Isaac Corp 0.62%
XPO Logistics Inc 0.61%
SolarEdge Technologies Inc 0.61%
Signature Bank 0.6%
Graco Inc 0.55%
Camden Property Trust 0.55%
FactSet Research Systems Inc 0.54%

MDY’s Top Holdings are Bio-Techne Corp, Molina Healthcare Inc, Cognex Corp, Fair Isaac Corp, and XPO Logistics Inc at 0.75%, 0.63%, 0.63%, 0.62%, and 0.61%.

SolarEdge Technologies Inc (0.61%), Signature Bank (0.6%), and Graco Inc (0.55%) have a slightly smaller but still significant weight. Camden Property Trust and FactSet Research Systems Inc are also represented in the MDY’s holdings at 0.55% and 0.54%.

Risk Analysis

XLF MDY
Mean Return 1.21 1.08
R-squared 73.26 86.66
Std. Deviation 18.86 16.83
Alpha 2.63 -4.1
Beta 1.15 1.15
Sharpe Ratio 0.74 0.73
Treynor Ratio 11.25 9.97

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

The SPDR S&P MIDCAP 400 ETF Trust (MDY) has a Mean Return of 1.08 with a Treynor Ratio of 9.97 and a Sharpe Ratio of 0.73. Its Beta is 1.15 while MDY’s Alpha is -4.1. Furthermore, the fund has a R-squared of 86.66 and a Standard Deviation of 16.83.

XLF’s Mean Return is 0.13 points higher than that of MDY and its R-squared is 13.40 points lower. With a Standard Deviation of 18.86, XLF is slightly more volatile than MDY. The Alpha and Beta of XLF are 6.73 points higher and 0.00 points lower than MDY’s Alpha and Beta.

Performance

Annual Returns

XLF vs. MDY - Annual Returns

Year XLF MDY
2020 -1.68% 13.51%
2019 31.88% 25.86%
2018 -13.09% -11.28%
2017 22.03% 15.89%
2016 22.55% 20.33%
2015 -1.6% -2.4%
2014 15.02% 9.42%
2013 35.37% 33.08%
2012 28.53% 17.58%
2011 -17.16% -1.99%
2010 11.97% 26.17%

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 MDY, returning 33.08% on an annual basis. The poorest year for MDY in the last ten years was 2018, with a yield of -11.28%. Most years the SPDR S&P MIDCAP 400 ETF Trust has given investors modest returns, such as in 2020, 2017, and 2012, when gains were 13.51%, 15.89%, and 17.58% respectively.

Portfolio Growth

XLF vs. MDY - Portfolio Growth

Fund Initial Balance Final Balance CAGR
XLF $10,000 $30,782 12.17%
MDY $10,000 $36,524 13.29%

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 MDY, the end total would have been $36,524. This equates to a $26,524 profit over 11 years and a compound annual growth rate (CAGR) of 13.29%.

XLF’s CAGR is 1.12 percentage points lower than that of MDY and as a result, would have yielded $5,742 less on a $10,000 investment. Thus, XLF performed worse than MDY by 1.12% annually.


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