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.
|Name||Financial Select Sector SPDR Fund||Schwab U.S. Small-Cap ETF|
|Issuer||SPDR State Street Global Advisors||Schwab ETFs|
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%).
FYI: The best way I've found to invest in ETFs is through M1 Finance. It's free and you even get an instant line of credit! Have a look here (link to M1 Finance).
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%).
|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%.
|AMC Entertainment Holdings Inc Class A||0.67%|
|Caesars Entertainment Inc||0.51%|
|Plug Power Inc||0.41%|
|10x Genomics Inc Ordinary Shares – Class A||0.34%|
|GameStop Corp Class A||0.28%|
|Penn National Gaming Inc||0.27%|
|Axon Enterprise Inc||0.27%|
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%.
NOTE: The easiest way to add diversification to your portfolio is to invest in real estate through Fundrise. You can become private real estate investor without the burden of property management! Check it out here (link to Fundrise).
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.
FYI: Another great way to get exposure to the real estate sector is by investing in real estate debt. Groundfloor offers fantastic short-term, high-yield bonds that can add diversification to your portfolio!
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.
|Fund||Initial Balance||Final Balance||CAGR|
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.
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.