The Financial Select Sector SPDR Fund (XLF) and the iShares MSCI USA Momentum Factor ETF (MTUM) are both among the Top 100 ETFs. XLF is a SPDR State Street Global Advisors Financial fund and MTUM is a iShares Large Growth fund. So, what’s the difference between XLF and MTUM? And which fund is better?
The expense ratio of XLF is 0.03 percentage points lower than MTUM’s (0.12% vs. 0.15%). XLF also has a higher exposure to the financial services sector and a higher standard deviation. Overall, XLF has provided lower returns than MTUM over the past ten years.
In this article, we’ll compare XLF vs. MTUM. We’ll look at risk metrics and performance, as well as at their industry exposure and annual returns. Moreover, I’ll also discuss XLF’s and MTUM’s portfolio growth, fund composition, and holdings and examine how these affect their overall returns.
|Name||Financial Select Sector SPDR Fund||iShares MSCI USA Momentum Factor 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 MSCI USA Momentum Factor ETF (MTUM) is a Large Growth fund that is issued by iShares. It currently has 14.53B total assets under management and has yielded an average annual return of 17.37% over the past 10 years. The fund has a dividend yield of 0.44% with an expense ratio of 0.15%.
XLF’s dividend yield is 1.13% higher than that of MTUM (1.57% vs. 0.44%). Also, XLF yielded on average 5.20% less per year over the past decade (12.17% vs. 17.37%). The expense ratio of XLF is 0.03 percentage points lower than MTUM’s (0.12% vs. 0.15%).
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 MSCI USA Momentum Factor ETF (MTUM) has the most exposure to the Financial Services sector at 34.32%. This is followed by Technology and Communication Services at 15.24% and 13.18% respectively. Real Estate (0.43%), Energy (1.77%), and Consumer Defensive (2.88%) only make up 5.08% of the fund’s total assets.
MTUM’s mid-section with moderate exposure is comprised of Basic Materials, Healthcare, Consumer Cyclical, Industrials, and Communication Services stocks at 3.15%, 6.41%, 9.96%, 12.47%, and 13.18%.
XLF is 65.68% more exposed to the Financial Services sector than MTUM (100.0% vs 34.32%). XLF’s exposure to Technology and Industrials stocks is 15.24% lower and 12.47% lower respectively (0.0% vs. 15.24% and 0.0% vs. 12.47%). In total, Consumer Cyclical, Real Estate, and Consumer Defensive also make up 13.27% less of the fund’s holdings compared to MTUM (0.00% vs. 13.27%).
|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%.
|The Walt Disney Co||4.39%|
|JPMorgan Chase & Co||4.35%|
|Berkshire Hathaway Inc Class B||4.34%|
|Bank of America Corp||3.81%|
|PayPal Holdings Inc||3.76%|
|Wells Fargo & Co||3.05%|
|Applied Materials Inc||3.05%|
|Alphabet Inc Class C||2.84%|
MTUM’s Top Holdings are Tesla Inc, The Walt Disney Co, JPMorgan Chase & Co, Berkshire Hathaway Inc Class B, and Bank of America Corp at 5.63%, 4.39%, 4.35%, 4.34%, and 3.81%.
PayPal Holdings Inc (3.76%), Wells Fargo & Co (3.05%), and Applied Materials Inc (3.05%) have a slightly smaller but still significant weight. Moderna Inc and Alphabet Inc Class C are also represented in the MTUM’s holdings at 2.89% and 2.84%.
The Financial Select Sector SPDR Fund (XLF) has a R-squared of 73.26 with a Mean Return of 1.21 and a Alpha of 2.63. Its Standard Deviation is 18.86 while XLF’s Treynor Ratio is 11.25. Furthermore, the fund has a Beta of 1.15 and a Sharpe Ratio of 0.74.
The iShares MSCI USA Momentum Factor ETF (MTUM) has a R-squared of 0 with a Alpha of 0 and a Beta of 0. Its Mean Return is 0 while MTUM’s Standard Deviation is 0. Furthermore, the fund has a Sharpe Ratio of 0 and a Treynor Ratio of 0.
XLF’s Mean Return is 1.21 points higher than that of MTUM and its R-squared is 73.26 points higher. With a Standard Deviation of 18.86, XLF is slightly more volatile than MTUM. The Alpha and Beta of XLF are 2.63 points higher and 1.15 points higher than MTUM’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 2017 was the strongest year for MTUM, returning 37.6% on an annual basis. The poorest year for MTUM in the last ten years was 2018, with a yield of -1.77%. Most years the iShares MSCI USA Momentum Factor ETF has given investors modest returns, such as in 2010, 2016, and 2015, when gains were 0.0%, 4.89%, and 9.12% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in XLF would have resulted in a final balance of $19,073. This is a profit of $9,073 over 7 years and amounts to a compound annual growth rate (CAGR) of 12.17%.
With a $10,000 investment in MTUM, the end total would have been $29,301. This equates to a $19,301 profit over 7 years and a compound annual growth rate (CAGR) of 17.37%.
XLF’s CAGR is 5.20 percentage points lower than that of MTUM and as a result, would have yielded $10,228 less on a $10,000 investment. Thus, XLF performed worse than MTUM by 5.20% 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.