XLF vs. SCHP: What’s The Difference?

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

The expense ratio of XLF is 0.07 percentage points higher than SCHP’s (0.12% vs. 0.05%). XLF also has a high exposure to the financial services sector while SCHP is mostly comprised of AAA bonds. Overall, XLF has provided higher returns than SCHP over the past ten years.

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

Summary

XLF SCHP
Name Financial Select Sector SPDR Fund Schwab U.S. TIPS ETF
Category Financial Inflation-Protected Bond
Issuer SPDR State Street Global Advisors Schwab ETFs
AUM 40.81B 18.41B
Avg. Return 12.17% 3.92%
Div. Yield 1.57% 1.97%
Expense Ratio 0.12% 0.05%

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. TIPS ETF (SCHP) is a Inflation-Protected Bond fund that is issued by Schwab ETFs. It currently has 18.41B total assets under management and has yielded an average annual return of 3.92% over the past 10 years. The fund has a dividend yield of 1.97% with an expense ratio of 0.05%.

XLF’s dividend yield is 0.40% lower than that of SCHP (1.57% vs. 1.97%). Also, XLF yielded on average 8.25% more per year over the past decade (12.17% vs. 3.92%). The expense ratio of XLF is 0.07 percentage points higher than SCHP’s (0.12% vs. 0.05%).

Fund Composition

Holdings

XLF - 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%.

SCHP - Holdings

SCHP Bond Sectors Weight
AAA 100.0%
Others 0.0%
Below B 0.0%
B 0.0%
BB 0.0%
BBB 0.0%
A 0.0%
AA 0.0%
US Government 0.0%

SCHP’s Top Bond Sectors are ratings of AAA, Others, Below B, B, and BB at 100.0%, 0.0%, 0.0%, 0.0%, and 0.0%. The fund is less weighted towards BBB (0.0%), A (0.0%), and AA (0.0%) rated bonds.

Risk Analysis

XLF SCHP
Mean Return 1.21 0.28
R-squared 73.26 66.16
Std. Deviation 18.86 4.32
Alpha 2.63 -0.5
Beta 1.15 1.17
Sharpe Ratio 0.74 0.64
Treynor Ratio 11.25 2.31

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 R-squared is 73.26 while XLF’s Beta is 1.15. Furthermore, the fund has a Alpha of 2.63 and a Treynor Ratio of 11.25.

The Schwab U.S. TIPS ETF (SCHP) has a Mean Return of 0.28 with a Treynor Ratio of 2.31 and a Beta of 1.17. Its Alpha is -0.5 while SCHP’s R-squared is 66.16. Furthermore, the fund has a Sharpe Ratio of 0.64 and a Standard Deviation of 4.32.

XLF’s Mean Return is 0.93 points higher than that of SCHP and its R-squared is 7.10 points higher. With a Standard Deviation of 18.86, XLF is slightly more volatile than SCHP. The Alpha and Beta of XLF are 3.13 points higher and 0.02 points lower than SCHP’s Alpha and Beta.

Performance

Annual Returns

XLF vs. SCHP - Annual Returns

Year XLF SCHP
2020 -1.68% 10.94%
2019 31.88% 8.36%
2018 -13.09% -1.31%
2017 22.03% 2.95%
2016 22.55% 4.6%
2015 -1.6% -1.5%
2014 15.02% 3.56%
2013 35.37% -8.66%
2012 28.53% 6.83%
2011 -17.16% 13.38%
2010 11.97% 0.0%

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 SCHP, returning 13.38% on an annual basis. The poorest year for SCHP in the last ten years was 2013, with a yield of -8.66%. Most years the Schwab U.S. TIPS ETF has given investors modest returns, such as in 2017, 2014, and 2016, when gains were 2.95%, 3.56%, and 4.6% respectively.

Portfolio Growth

XLF vs. SCHP - Portfolio Growth

Fund Initial Balance Final Balance CAGR
XLF $10,000 $27,491 12.17%
SCHP $10,000 $14,418 3.92%

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 SCHP, the end total would have been $14,418. This equates to a $4,418 profit over 10 years and a compound annual growth rate (CAGR) of 3.92%.

XLF’s CAGR is 8.25 percentage points higher than that of SCHP and as a result, would have yielded $13,073 more on a $10,000 investment. Thus, XLF outperformed SCHP by 8.25% annually.


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