XLF vs. XLE: What’s The Difference?

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

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

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

Summary

XLF XLE
Name Financial Select Sector SPDR Fund Energy Select Sector SPDR Fund
Category Financial Equity Energy
Issuer SPDR State Street Global Advisors SPDR State Street Global Advisors
AUM 40.81B 25.55B
Avg. Return 12.17% 1.28%
Div. Yield 1.57% 3.92%
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 Energy Select Sector SPDR Fund (XLE) is a Equity Energy fund that is issued by SPDR State Street Global Advisors. It currently has 25.55B total assets under management and has yielded an average annual return of 1.28% over the past 10 years. The fund has a dividend yield of 3.92% with an expense ratio of 0.12%.

XLF’s dividend yield is 2.35% lower than that of XLE (1.57% vs. 3.92%). Also, XLF yielded on average 10.89% more per year over the past decade (12.17% vs. 1.28%). XLF and XLE have the same expense ratio: 0.12%.

Fund Composition

Industry Exposure

XLF vs. XLE - Industry Exposure

XLF XLE
Technology 0.0% 0.0%
Industrials 0.0% 0.0%
Energy 0.0% 100.0%
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 Energy Select Sector SPDR Fund (XLE) has the most exposure to the Energy 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.

XLE’s mid-section with moderate exposure is comprised of Consumer Defensive, Healthcare, Utilities, Communication Services, 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 XLE (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 XLE (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%.

XLE - Holdings

XLE Holdings Weight
Exxon Mobil Corp 23.7%
Chevron Corp 20.03%
ConocoPhillips 4.64%
EOG Resources Inc 4.46%
Schlumberger Ltd 4.43%
Marathon Petroleum Corp 4.17%
Pioneer Natural Resources Co 4.08%
Phillips 66 4.07%
Kinder Morgan Inc Class P 3.85%
Williams Companies Inc 3.5%

XLE’s Top Holdings are Exxon Mobil Corp, Chevron Corp, ConocoPhillips, EOG Resources Inc, and Schlumberger Ltd at 23.7%, 20.03%, 4.64%, 4.46%, and 4.43%.

Marathon Petroleum Corp (4.17%), Pioneer Natural Resources Co (4.08%), and Phillips 66 (4.07%) have a slightly smaller but still significant weight. Kinder Morgan Inc Class P and Williams Companies Inc are also represented in the XLE’s holdings at 3.85% and 3.5%.

Risk Analysis

XLF XLE
Mean Return 1.21 0.32
R-squared 73.26 61.84
Std. Deviation 18.86 27.52
Alpha 2.63 -11.98
Beta 1.15 1.54
Sharpe Ratio 0.74 0.12
Treynor Ratio 11.25 -0.4

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

The Energy Select Sector SPDR Fund (XLE) has a Mean Return of 0.32 with a R-squared of 61.84 and a Standard Deviation of 27.52. Its Alpha is -11.98 while XLE’s Sharpe Ratio is 0.12. Furthermore, the fund has a Beta of 1.54 and a Treynor Ratio of -0.4.

XLF’s Mean Return is 0.89 points higher than that of XLE and its R-squared is 11.42 points higher. With a Standard Deviation of 18.86, XLF is slightly less volatile than XLE. The Alpha and Beta of XLF are 14.61 points higher and 0.39 points lower than XLE’s Alpha and Beta.

Performance

Annual Returns

XLF vs. XLE - Annual Returns

Year XLF XLE
2020 -1.68% -32.56%
2019 31.88% 11.87%
2018 -13.09% -18.1%
2017 22.03% -1.01%
2016 22.55% 27.95%
2015 -1.6% -21.47%
2014 15.02% -8.61%
2013 35.37% 26.16%
2012 28.53% 5.17%
2011 -17.16% 2.98%
2010 11.97% 21.7%

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 2016 was the strongest year for XLE, returning 27.95% on an annual basis. The poorest year for XLE in the last ten years was 2020, with a yield of -32.56%. Most years the Energy Select Sector SPDR Fund has given investors modest returns, such as in 2017, 2011, and 2012, when gains were -1.01%, 2.98%, and 5.17% respectively.

Portfolio Growth

XLF vs. XLE - Portfolio Growth

Fund Initial Balance Final Balance CAGR
XLF $10,000 $30,782 12.17%
XLE $10,000 $9,339 1.28%

A $10,000 investment in XLF would have resulted in a final balance of $30,782. This is a profit of $20,782 over 11 years and amounts to a compound annual growth rate (CAGR) of 12.17%.

With a $10,000 investment in XLE, the end total would have been $9,339. This equates to a $-661 profit over 11 years and a compound annual growth rate (CAGR) of 1.28%.

XLF’s CAGR is 10.89 percentage points higher than that of XLE and as a result, would have yielded $21,443 more on a $10,000 investment. Thus, XLF outperformed XLE by 10.89% annually.


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