XLF vs. XLC: What’s The Difference?

The Financial Select Sector SPDR Fund (XLF) and the Communication Services Select Sector SPDR Fund (XLC) are both among the Top 100 ETFs. XLF is a SPDR State Street Global Advisors Financial fund and XLC is a SPDR State Street Global Advisors Communications fund. So, what’s the difference between XLF and XLC? And which fund is better?

XLF and XLC have the same expense ratio: 0.12%. XLF also has a higher exposure to the financial services sector and a higher standard deviation. Overall, XLF has provided lower returns than XLC over the past ten years.

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

Summary

XLF XLC
Name Financial Select Sector SPDR Fund Communication Services Select Sector SPDR Fund
Category Financial Communications
Issuer SPDR State Street Global Advisors SPDR State Street Global Advisors
AUM 40.81B 14.09B
Avg. Return 12.17% 29.04%
Div. Yield 1.57% 0.62%
Expense Ratio 0.12% 0.12%

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 Communication Services Select Sector SPDR Fund (XLC) is a Communications fund that is issued by SPDR State Street Global Advisors. It currently has 14.09B total assets under management and has yielded an average annual return of 29.04% over the past 10 years. The fund has a dividend yield of 0.62% with an expense ratio of 0.12%.

XLF’s dividend yield is 0.95% higher than that of XLC (1.57% vs. 0.62%). Also, XLF yielded on average 16.87% less per year over the past decade (12.17% vs. 29.04%). XLF and XLC have the same expense ratio: 0.12%.

Fund Composition

Industry Exposure

XLF vs. XLC - Industry Exposure

XLF XLC
Technology 0.0% 0.0%
Industrials 0.0% 0.0%
Energy 0.0% 0.0%
Communication Services 0.0% 100.0%
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 Communication Services Select Sector SPDR Fund (XLC) has the most exposure to the Communication Services sector at 100.0%. This is followed by Technology and Industrials 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.

XLC’s mid-section with moderate exposure is comprised of Consumer Defensive, Healthcare, Utilities, Energy, and Industrials 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 XLC (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 XLC (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%.

XLC - Holdings

XLC Holdings Weight
Facebook Inc A 23.75%
Alphabet Inc A 11.49%
Alphabet Inc Class C 11.16%
Netflix Inc 4.78%
Charter Communications Inc A 4.65%
Comcast Corp Class A 4.44%
T-Mobile US Inc 4.41%
The Walt Disney Co 4.39%
AT&T Inc 4.35%
Verizon Communications Inc 4.33%

XLC’s Top Holdings are Facebook Inc A, Alphabet Inc A, Alphabet Inc Class C, Netflix Inc, and Charter Communications Inc A at 23.75%, 11.49%, 11.16%, 4.78%, and 4.65%.

Comcast Corp Class A (4.44%), T-Mobile US Inc (4.41%), and The Walt Disney Co (4.39%) have a slightly smaller but still significant weight. AT&T Inc and Verizon Communications Inc are also represented in the XLC’s holdings at 4.35% and 4.33%.

Risk Analysis

XLF XLC
Mean Return 1.21 0
R-squared 73.26 0
Std. Deviation 18.86 0
Alpha 2.63 0
Beta 1.15 0
Sharpe Ratio 0.74 0
Treynor Ratio 11.25 0

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

The Communication Services Select Sector SPDR Fund (XLC) has a Treynor Ratio of 0 with a Beta of 0 and a Sharpe Ratio of 0. Its Alpha is 0 while XLC’s Mean Return is 0. Furthermore, the fund has a R-squared of 0 and a Standard Deviation of 0.

XLF’s Mean Return is 1.21 points higher than that of XLC and its R-squared is 73.26 points higher. With a Standard Deviation of 18.86, XLF is slightly more volatile than XLC. The Alpha and Beta of XLF are 2.63 points higher and 1.15 points higher than XLC’s Alpha and Beta.

Performance

Annual Returns

XLF vs. XLC - Annual Returns

Year XLF XLC
2020 -1.68% 26.85%
2019 31.88% 31.22%
2018 -13.09% 0.0%
2017 22.03% 0.0%
2016 22.55% 0.0%
2015 -1.6% 0.0%
2014 15.02% 0.0%
2013 35.37% 0.0%
2012 28.53% 0.0%
2011 -17.16% 0.0%
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 2019 was the strongest year for XLC, returning 31.22% on an annual basis. The poorest year for XLC in the last ten years was 2018, with a yield of 0.0%. Most years the Communication Services Select Sector SPDR Fund has given investors modest returns, such as in 2014, 2013, and 2012, when gains were 0.0%, 0.0%, and 0.0% respectively.

Portfolio Growth

XLF vs. XLC - Portfolio Growth

Fund Initial Balance Final Balance CAGR
XLF $10,000 $12,966 12.17%
XLC $10,000 $16,645 29.04%

A $10,000 investment in XLF would have resulted in a final balance of $12,966. This is a profit of $2,966 over 2 years and amounts to a compound annual growth rate (CAGR) of 12.17%.

With a $10,000 investment in XLC, the end total would have been $16,645. This equates to a $6,645 profit over 2 years and a compound annual growth rate (CAGR) of 29.04%.

XLF’s CAGR is 16.87 percentage points lower than that of XLC and as a result, would have yielded $3,679 less on a $10,000 investment. Thus, XLF performed worse than XLC by 16.87% annually.


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