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XLF vs. SCHA: What’s The Difference?

The Financial Select Sector SPDR Fund (XLF) and the Schwab U.S. Small-Cap ETF (SCHA) are both among the Top 100 ETFs. XLF is a SPDR State Street Global Advisors Financial fund and SCHA is a Schwab ETFs Small Blend fund. So, what’s the difference between XLF and SCHA? And which fund is better?

The expense ratio of XLF is 0.08 percentage points higher than SCHA’s (0.12% vs. 0.04%). XLF also has a higher exposure to the financial services sector and a higher standard deviation. Overall, XLF has provided lower returns than SCHA over the past ten years.

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

Introduction To Mutual Funds
Introduction To Mutual Funds
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Summary

XLFSCHA
NameFinancial Select Sector SPDR FundSchwab U.S. Small-Cap ETF
CategoryFinancialSmall Blend
IssuerSPDR State Street Global AdvisorsSchwab ETFs
AUM40.81B16.51B
Avg. Return12.17%12.62%
Div. Yield1.57%0.98%
Expense Ratio0.12%0.04%

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 Schwab U.S. Small-Cap ETF (SCHA) is a Small Blend fund that is issued by Schwab ETFs. It currently has 16.51B total assets under management and has yielded an average annual return of 12.62% over the past 10 years. The fund has a dividend yield of 0.98% with an expense ratio of 0.04%.

XLF’s dividend yield is 0.59% higher than that of SCHA (1.57% vs. 0.98%). Also, XLF yielded on average 0.46% less per year over the past decade (12.17% vs. 12.62%). The expense ratio of XLF is 0.08 percentage points higher than SCHA’s (0.12% vs. 0.04%).

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Fund Composition

Industry Exposure

XLF vs. SCHA - Industry Exposure

XLFSCHA
Technology0.0%14.91%
Industrials0.0%15.37%
Energy0.0%3.35%
Communication Services0.0%3.5%
Utilities0.0%1.83%
Healthcare0.0%16.5%
Consumer Defensive0.0%3.75%
Real Estate0.0%7.83%
Financial Services100.0%14.49%
Consumer Cyclical0.0%14.48%
Basic Materials0.0%3.98%

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 Schwab U.S. Small-Cap ETF (SCHA) has the most exposure to the Healthcare sector at 16.5%. This is followed by Industrials and Technology at 15.37% and 14.91% respectively. Energy (3.35%), Communication Services (3.5%), and Consumer Defensive (3.75%) only make up 10.60% of the fund’s total assets.

SCHA’s mid-section with moderate exposure is comprised of Basic Materials, Real Estate, Consumer Cyclical, Financial Services, and Technology stocks at 3.98%, 7.83%, 14.48%, 14.49%, and 14.91%.

XLF is 85.51% more exposed to the Financial Services sector than SCHA (100.0% vs 14.49%). XLF’s exposure to Technology and Industrials stocks is 14.91% lower and 15.37% lower respectively (0.0% vs. 14.91% and 0.0% vs. 15.37%). In total, Consumer Cyclical, Real Estate, and Consumer Defensive also make up 26.06% less of the fund’s holdings compared to SCHA (0.00% vs. 26.06%).

Holdings

XLF - Holdings

XLF HoldingsWeight
Berkshire Hathaway Inc Class B12.83%
JPMorgan Chase & Co11.47%
Bank of America Corp7.57%
Wells Fargo & Co4.56%
Citigroup Inc3.56%
Morgan Stanley3.32%
Goldman Sachs Group Inc3.15%
BlackRock Inc3.02%
Charles Schwab Corp2.66%
American Express Co2.62%

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%.

SCHA - Holdings

SCHA HoldingsWeight
AMC Entertainment Holdings Inc Class A0.67%
Caesars Entertainment Inc0.51%
Cloudflare Inc0.48%
NovoCure Ltd0.45%
Plug Power Inc0.41%
10x Genomics Inc Ordinary Shares – Class A0.34%
GameStop Corp Class A0.28%
RH0.27%
Penn National Gaming Inc0.27%
Axon Enterprise Inc0.27%

SCHA’s Top Holdings are AMC Entertainment Holdings Inc Class A, Caesars Entertainment Inc, Cloudflare Inc, NovoCure Ltd, and Plug Power Inc at 0.67%, 0.51%, 0.48%, 0.45%, and 0.41%.

10x Genomics Inc Ordinary Shares – Class A (0.34%), GameStop Corp Class A (0.28%), and RH (0.27%) have a slightly smaller but still significant weight. Penn National Gaming Inc and Axon Enterprise Inc are also represented in the SCHA’s holdings at 0.27% and 0.27%.

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Risk Analysis

XLFSCHA
Mean Return1.211.14
R-squared73.2682.26
Std. Deviation18.8618.68
Alpha2.63-4.65
Beta1.151.25
Sharpe Ratio0.740.7
Treynor Ratio11.259.62

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

The Schwab U.S. Small-Cap ETF (SCHA) has a Standard Deviation of 18.68 with a Mean Return of 1.14 and a Sharpe Ratio of 0.7. Its Treynor Ratio is 9.62 while SCHA’s R-squared is 82.26. Furthermore, the fund has a Alpha of -4.65 and a Beta of 1.25.

XLF’s Mean Return is 0.07 points higher than that of SCHA and its R-squared is 9.00 points lower. With a Standard Deviation of 18.86, XLF is slightly more volatile than SCHA. The Alpha and Beta of XLF are 7.28 points higher and 0.10 points lower than SCHA’s Alpha and Beta.

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Performance

Annual Returns

XLF vs. SCHA - Annual Returns

YearXLFSCHA
2020-1.68%19.35%
201931.88%26.54%
2018-13.09%-11.75%
201722.03%15.04%
201622.55%19.88%
2015-1.6%-4.24%
201415.02%6.53%
201335.37%39.59%
201228.53%18.24%
2011-17.16%-2.95%
201011.97%28.31%

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 SCHA, returning 39.59% on an annual basis. The poorest year for SCHA in the last ten years was 2018, with a yield of -11.75%. Most years the Schwab U.S. Small-Cap ETF has given investors modest returns, such as in 2017, 2012, and 2020, when gains were 15.04%, 18.24%, and 19.35% respectively.

Portfolio Growth

XLF vs. SCHA - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
XLF$10,000$27,49112.17%
SCHA$10,000$30,03512.62%

A $10,000 investment in XLF would have resulted in a final balance of $27,491. This is a profit of $17,491 over 10 years and amounts to a compound annual growth rate (CAGR) of 12.17%.

With a $10,000 investment in SCHA, the end total would have been $30,035. This equates to a $20,035 profit over 10 years and a compound annual growth rate (CAGR) of 12.62%.

XLF’s CAGR is 0.46 percentage points lower than that of SCHA and as a result, would have yielded $2,544 less on a $10,000 investment. Thus, XLF performed worse than SCHA by 0.46% annually.


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