XLF vs. TQQQ: What’s The Difference?

The Financial Select Sector SPDR Fund (XLF) and the ProShares UltraPro QQQ (TQQQ) are both among the Top 100 ETFs. XLF is a SPDR State Street Global Advisors Financial fund and TQQQ is a ProShares Trading–Leveraged Equity fund. So, what’s the difference between XLF and TQQQ? And which fund is better?

The expense ratio of XLF is 0.83 percentage points lower than TQQQ’s (0.12% vs. 0.95%). XLF also has a higher exposure to the financial services sector and a lower standard deviation. Overall, XLF has provided lower returns than TQQQ over the past ten years.

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

Summary

XLF TQQQ
Name Financial Select Sector SPDR Fund ProShares UltraPro QQQ
Category Financial Trading–Leveraged Equity
Issuer SPDR State Street Global Advisors ProShares
AUM 40.81B 12.41B
Avg. Return 12.17% 61.22%
Div. Yield 1.57% 0.0%
Expense Ratio 0.12% 0.95%

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 ProShares UltraPro QQQ (TQQQ) is a Trading–Leveraged Equity fund that is issued by ProShares. It currently has 12.41B total assets under management and has yielded an average annual return of 61.22% over the past 10 years. The fund has a dividend yield of 0.0% with an expense ratio of 0.95%.

XLF’s dividend yield is 1.57% higher than that of TQQQ (1.57% vs. 0.0%). Also, XLF yielded on average 49.06% less per year over the past decade (12.17% vs. 61.22%). The expense ratio of XLF is 0.83 percentage points lower than TQQQ’s (0.12% vs. 0.95%).

Fund Composition

Industry Exposure

XLF vs. TQQQ - Industry Exposure

XLF TQQQ
Technology 0.0% 0.0%
Industrials 0.0% 0.0%
Energy 0.0% 0.0%
Communication Services 0.0% 0.0%
Utilities 0.0% 0.0%
Healthcare 0.0% 0.0%
Consumer Defensive 0.0% 0.0%
Real Estate 0.0% 0.0%
Financial Services 100.0% 0.0%
Consumer Cyclical 0.0% 0.0%
Basic Materials 0.0% 0.0%

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 ProShares UltraPro QQQ (TQQQ) has the most exposure to the Technology sector at 0.0%. This is followed by Industrials and Energy at 0.0% and 0.0% respectively. Consumer Cyclical (0.0%), Financial Services (0.0%), and Real Estate (0.0%) only make up 0.00% of the fund’s total assets.

TQQQ’s mid-section with moderate exposure is comprised of Consumer Defensive, Healthcare, Utilities, Communication Services, and Energy stocks at 0.0%, 0.0%, 0.0%, 0.0%, and 0.0%.

XLF is 100.00% more exposed to the Financial Services sector than TQQQ (100.0% vs 0.0%). XLF’s exposure to Technology and Industrials stocks is 0.00% lower and 0.00% lower respectively (0.0% vs. 0.0% and 0.0% vs. 0.0%). In total, Consumer Cyclical, Real Estate, and Consumer Defensive also make up 0.00% less of the fund’s holdings compared to TQQQ (0.00% vs. 0.00%).

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%.

TQQQ - Holdings

TQQQ Holdings Weight
Nasdaq 100 Index Swap Goldman Sachs International 45.11%
Nasdaq 100 Index Swap Societe Generale 44.73%
Nasdaq 100 Index Swap Bnp Paribas 38.05%
Nasdaq 100 Index Swap Bank Of America Na 31.53%
Nasdaq 100 Index Swap Citibank Na 31.49%
Nasdaq 100 Index Swap Jp Morgan Securities 26.2%
Apple Inc 7.49%
Microsoft Corp 6.69%
Nasdaq 100 Index Swap Credit Suisse International 5.9%
Amazon.com Inc 5.68%

TQQQ’s Top Holdings are Nasdaq 100 Index Swap Goldman Sachs International, Nasdaq 100 Index Swap Societe Generale, Nasdaq 100 Index Swap Bnp Paribas, Nasdaq 100 Index Swap Bank Of America Na, and Nasdaq 100 Index Swap Citibank Na at 45.11%, 44.73%, 38.05%, 31.53%, and 31.49%.

Nasdaq 100 Index Swap Jp Morgan Securities (26.2%), Apple Inc (7.49%), and Microsoft Corp (6.69%) have a slightly smaller but still significant weight. Nasdaq 100 Index Swap Credit Suisse International and Amazon.com Inc are also represented in the TQQQ’s holdings at 5.9% and 5.68%.

Risk Analysis

XLF TQQQ
Mean Return 1.21 4.65
R-squared 73.26 83.64
Std. Deviation 18.86 50.08
Alpha 2.63 7.29
Beta 1.15 3.37
Sharpe Ratio 0.74 1.1
Treynor Ratio 11.25 15.65

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

The ProShares UltraPro QQQ (TQQQ) has a Alpha of 7.29 with a Sharpe Ratio of 1.1 and a Mean Return of 4.65. Its Beta is 3.37 while TQQQ’s Standard Deviation is 50.08. Furthermore, the fund has a Treynor Ratio of 15.65 and a R-squared of 83.64.

XLF’s Mean Return is 3.44 points lower than that of TQQQ and its R-squared is 10.38 points lower. With a Standard Deviation of 18.86, XLF is slightly less volatile than TQQQ. The Alpha and Beta of XLF are 4.66 points lower and 2.22 points lower than TQQQ’s Alpha and Beta.

Performance

Annual Returns

XLF vs. TQQQ - Annual Returns

Year XLF TQQQ
2020 -1.68% 109.85%
2019 31.88% 133.93%
2018 -13.09% -19.65%
2017 22.03% 118.65%
2016 22.55% 11.04%
2015 -1.6% 17.41%
2014 15.02% 56.82%
2013 35.37% 139.98%
2012 28.53% 51.95%
2011 -17.16% -7.77%
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 2013 was the strongest year for TQQQ, returning 139.98% on an annual basis. The poorest year for TQQQ in the last ten years was 2018, with a yield of -19.65%. Most years the ProShares UltraPro QQQ has given investors modest returns, such as in 2015, 2012, and 2014, when gains were 17.41%, 51.95%, and 56.82% respectively.

Portfolio Growth

XLF vs. TQQQ - Portfolio Growth

Fund Initial Balance Final Balance CAGR
XLF $10,000 $27,491 12.17%
TQQQ $10,000 $593,012 61.22%

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 TQQQ, the end total would have been $593,012. This equates to a $583,012 profit over 10 years and a compound annual growth rate (CAGR) of 61.22%.

XLF’s CAGR is 49.06 percentage points lower than that of TQQQ and as a result, would have yielded $565,521 less on a $10,000 investment. Thus, XLF performed worse than TQQQ by 49.06% annually.


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