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.
|Name||Financial Select Sector SPDR Fund||Schwab U.S. TIPS 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. 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%).
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).
|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%.
|SCHP Bond Sectors||Weight|
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.
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 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.
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 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.
|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 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.
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.