The Financial Select Sector SPDR Fund (XLF) and the iShares National Muni Bond ETF (MUB) are both among the Top 100 ETFs. XLF is a SPDR State Street Global Advisors Financial fund and MUB is a iShares Muni National Interm fund. So, what’s the difference between XLF and MUB? And which fund is better?
The expense ratio of XLF is 0.05 percentage points higher than MUB’s (0.12% vs. 0.07%). XLF also has a high exposure to the financial services sector while MUB is mostly comprised of AA bonds. Overall, XLF has provided higher returns than MUB over the past ten years.
In this article, we’ll compare XLF vs. MUB. We’ll look at holdings and industry exposure, as well as at their annual returns and performance. Moreover, I’ll also discuss XLF’s and MUB’s risk metrics, fund composition, and portfolio growth and examine how these affect their overall returns.
Summary
| XLF | MUB | |
| Name | Financial Select Sector SPDR Fund | iShares National Muni Bond ETF |
| Category | Financial | Muni National Interm |
| Issuer | SPDR State Street Global Advisors | iShares |
| AUM | 40.81B | 22.71B |
| Avg. Return | 12.17% | 4.04% |
| Div. Yield | 1.57% | 1.96% |
| Expense Ratio | 0.12% | 0.07% |
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 National Muni Bond ETF (MUB) is a Muni National Interm fund that is issued by iShares. It currently has 22.71B total assets under management and has yielded an average annual return of 4.04% over the past 10 years. The fund has a dividend yield of 1.96% with an expense ratio of 0.07%.
XLF’s dividend yield is 0.39% lower than that of MUB (1.57% vs. 1.96%). Also, XLF yielded on average 8.13% more per year over the past decade (12.17% vs. 4.04%). The expense ratio of XLF is 0.05 percentage points higher than MUB’s (0.12% vs. 0.07%).
Fund Composition
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%.
| MUB Bond Sectors | Weight |
| AA | 60.38% |
| AAA | 18.39% |
| A | 15.04% |
| BBB | 6.0% |
| Others | 0.17% |
| BB | 0.02% |
| Below B | 0.0% |
| B | 0.0% |
| US Government | 0.0% |
MUB’s Top Bond Sectors are ratings of AA, AAA, A, BBB, and Others at 60.38%, 18.39%, 15.04%, 6.0%, and 0.17%. The fund is less weighted towards BB (0.02%), Below B (0.0%), and B (0.0%) rated bonds.
Risk Analysis
| XLF | MUB | |
| Mean Return | 1.21 | 0.32 |
| R-squared | 73.26 | 99 |
| Std. Deviation | 18.86 | 3.68 |
| Alpha | 2.63 | -0.46 |
| Beta | 1.15 | 1.01 |
| Sharpe Ratio | 0.74 | 0.88 |
| Treynor Ratio | 11.25 | 3.2 |
The Financial Select Sector SPDR Fund (XLF) has a Sharpe Ratio of 0.74 with a Mean Return of 1.21 and a Standard Deviation of 18.86. Its Beta is 1.15 while XLF’s Treynor Ratio is 11.25. Furthermore, the fund has a Alpha of 2.63 and a R-squared of 73.26.
The iShares National Muni Bond ETF (MUB) has a Beta of 1.01 with a Sharpe Ratio of 0.88 and a Standard Deviation of 3.68. Its Treynor Ratio is 3.2 while MUB’s Mean Return is 0.32. Furthermore, the fund has a R-squared of 99 and a Alpha of -0.46.
XLF’s Mean Return is 0.89 points higher than that of MUB and its R-squared is 25.74 points lower. With a Standard Deviation of 18.86, XLF is slightly more volatile than MUB. The Alpha and Beta of XLF are 3.09 points higher and 0.14 points higher than MUB’s Alpha and Beta.
Performance
Annual Returns
| Year | XLF | MUB |
| 2020 | -1.68% | 4.87% |
| 2019 | 31.88% | 7.28% |
| 2018 | -13.09% | 0.86% |
| 2017 | 22.03% | 4.61% |
| 2016 | 22.55% | 0.06% |
| 2015 | -1.6% | 2.99% |
| 2014 | 15.02% | 8.61% |
| 2013 | 35.37% | -3.26% |
| 2012 | 28.53% | 6.14% |
| 2011 | -17.16% | 10.85% |
| 2010 | 11.97% | 1.4% |
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 2011 was the strongest year for MUB, returning 10.85% on an annual basis. The poorest year for MUB in the last ten years was 2013, with a yield of -3.26%. Most years the iShares National Muni Bond ETF has given investors modest returns, such as in 2015, 2017, and 2020, when gains were 2.99%, 4.61%, and 4.87% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| XLF | $10,000 | $30,782 | 12.17% |
| MUB | $10,000 | $15,333 | 4.04% |
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 MUB, the end total would have been $15,333. This equates to a $5,333 profit over 11 years and a compound annual growth rate (CAGR) of 4.04%.
XLF’s CAGR is 8.13 percentage points higher than that of MUB and as a result, would have yielded $15,449 more on a $10,000 investment. Thus, XLF outperformed MUB by 8.13% annually.
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