The Financial Select Sector SPDR Fund (XLF) and the Schwab U.S. Large-Cap Growth ETF (SCHG) are both among the Top 100 ETFs. XLF is a SPDR State Street Global Advisors Financial fund and SCHG is a Schwab ETFs Large Growth fund. So, what’s the difference between XLF and SCHG? And which fund is better?
The expense ratio of XLF is 0.08 percentage points higher than SCHG’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 SCHG over the past ten years.
In this article, we’ll compare XLF vs. SCHG. We’ll look at fund composition and performance, as well as at their industry exposure and holdings. Moreover, I’ll also discuss XLF’s and SCHG’s portfolio growth, annual returns, and risk metrics and examine how these affect their overall returns.
|Name||Financial Select Sector SPDR Fund||Schwab U.S. Large-Cap Growth 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. Large-Cap Growth ETF (SCHG) is a Large Growth fund that is issued by Schwab ETFs. It currently has 15.16B total assets under management and has yielded an average annual return of 17.81% over the past 10 years. The fund has a dividend yield of 0.43% with an expense ratio of 0.04%.
XLF’s dividend yield is 1.14% higher than that of SCHG (1.57% vs. 0.43%). Also, XLF yielded on average 5.64% less per year over the past decade (12.17% vs. 17.81%). The expense ratio of XLF is 0.08 percentage points higher than SCHG’s (0.12% vs. 0.04%).
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. Large-Cap Growth ETF (SCHG) has the most exposure to the Technology sector at 39.21%. This is followed by Communication Services and Consumer Cyclical at 17.07% and 15.01% respectively. Energy (0.2%), Real Estate (1.64%), and Basic Materials (1.68%) only make up 3.52% of the fund’s total assets.
SCHG’s mid-section with moderate exposure is comprised of Consumer Defensive, Industrials, Financial Services, Healthcare, and Consumer Cyclical stocks at 2.15%, 3.01%, 7.98%, 12.05%, and 15.01%.
XLF is 92.02% more exposed to the Financial Services sector than SCHG (100.0% vs 7.98%). XLF’s exposure to Technology and Industrials stocks is 39.21% lower and 3.01% lower respectively (0.0% vs. 39.21% and 0.0% vs. 3.01%). In total, Consumer Cyclical, Real Estate, and Consumer Defensive also make up 18.80% less of the fund’s holdings compared to SCHG (0.00% vs. 18.80%).
|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%.
|Facebook Inc A||4.45%|
|Alphabet Inc A||3.93%|
|Alphabet Inc Class C||3.82%|
|Visa Inc Class A||2.12%|
|UnitedHealth Group Inc||2.02%|
SCHG’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc A, and Alphabet Inc A at 11.49%, 10.91%, 7.89%, 4.45%, and 3.93%.
Alphabet Inc Class C (3.82%), Tesla Inc (2.8%), and NVIDIA Corp (2.67%) have a slightly smaller but still significant weight. Visa Inc Class A and UnitedHealth Group Inc are also represented in the SCHG’s holdings at 2.12% and 2.02%.
The Financial Select Sector SPDR Fund (XLF) has a R-squared of 73.26 with a Standard Deviation of 18.86 and a Alpha of 2.63. Its Mean Return is 1.21 while XLF’s Treynor Ratio is 11.25. Furthermore, the fund has a Sharpe Ratio of 0.74 and a Beta of 1.15.
The Schwab U.S. Large-Cap Growth ETF (SCHG) has a Alpha of 1.97 with a Mean Return of 1.46 and a Beta of 1.05. Its Treynor Ratio is 16.3 while SCHG’s Standard Deviation is 14.78. Furthermore, the fund has a Sharpe Ratio of 1.14 and a R-squared of 92.92.
XLF’s Mean Return is 0.25 points lower than that of SCHG and its R-squared is 19.66 points lower. With a Standard Deviation of 18.86, XLF is slightly more volatile than SCHG. The Alpha and Beta of XLF are 0.66 points higher and 0.10 points higher than SCHG’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 2020 was the strongest year for SCHG, returning 39.13% on an annual basis. The poorest year for SCHG in the last ten years was 2018, with a yield of -1.35%. Most years the Schwab U.S. Large-Cap Growth ETF has given investors modest returns, such as in 2014, 2010, and 2012, when gains were 15.74%, 16.83%, and 17.02% 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 SCHG, the end total would have been $47,556. This equates to a $37,556 profit over 10 years and a compound annual growth rate (CAGR) of 17.81%.
XLF’s CAGR is 5.64 percentage points lower than that of SCHG and as a result, would have yielded $20,065 less on a $10,000 investment. Thus, XLF performed worse than SCHG by 5.64% annually.
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