XLF vs. XLI: What’s The Difference?

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

XLF and XLI 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 XLI over the past ten years.

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

Summary

XLF XLI
Name Financial Select Sector SPDR Fund Industrial Select Sector SPDR Fund
Category Financial Industrials
Issuer SPDR State Street Global Advisors SPDR State Street Global Advisors
AUM 40.81B 19.33B
Avg. Return 12.17% 14.44%
Div. Yield 1.57% 1.25%
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 Industrial Select Sector SPDR Fund (XLI) is a Industrials fund that is issued by SPDR State Street Global Advisors. It currently has 19.33B total assets under management and has yielded an average annual return of 14.44% over the past 10 years. The fund has a dividend yield of 1.25% with an expense ratio of 0.12%.

XLF’s dividend yield is 0.32% higher than that of XLI (1.57% vs. 1.25%). Also, XLF yielded on average 2.28% less per year over the past decade (12.17% vs. 14.44%). XLF and XLI have the same expense ratio: 0.12%.

Fund Composition

Industry Exposure

XLF vs. XLI - Industry Exposure

XLF XLI
Technology 0.0% 1.82%
Industrials 0.0% 97.49%
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% 0.69%
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 Industrial Select Sector SPDR Fund (XLI) has the most exposure to the Industrials sector at 97.49%. This is followed by Technology and Consumer Cyclical at 1.82% and 0.69% respectively. Financial Services (0.0%), Real Estate (0.0%), and Consumer Defensive (0.0%) only make up 0.00% of the fund’s total assets.

XLI’s mid-section with moderate exposure is comprised of Healthcare, Utilities, Communication Services, Energy, and Consumer Cyclical stocks at 0.0%, 0.0%, 0.0%, 0.0%, and 0.69%.

XLF is 100.00% more exposed to the Financial Services sector than XLI (100.0% vs 0.0%). XLF’s exposure to Technology and Industrials stocks is 1.82% lower and 97.49% lower respectively (0.0% vs. 1.82% and 0.0% vs. 97.49%). In total, Consumer Cyclical, Real Estate, and Consumer Defensive also make up 0.69% less of the fund’s holdings compared to XLI (0.00% vs. 0.69%).

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%.

XLI - Holdings

XLI Holdings Weight
Honeywell International Inc 4.9%
United Parcel Service Inc Class B 4.84%
Union Pacific Corp 4.7%
Boeing Co 4.24%
Raytheon Technologies Corp 4.16%
Caterpillar Inc 3.84%
General Electric Co 3.8%
3M Co 3.7%
Deere & Co 3.54%
Lockheed Martin Corp 2.98%

XLI’s Top Holdings are Honeywell International Inc, United Parcel Service Inc Class B, Union Pacific Corp, Boeing Co, and Raytheon Technologies Corp at 4.9%, 4.84%, 4.7%, 4.24%, and 4.16%.

Caterpillar Inc (3.84%), General Electric Co (3.8%), and 3M Co (3.7%) have a slightly smaller but still significant weight. Deere & Co and Lockheed Martin Corp are also represented in the XLI’s holdings at 3.54% and 2.98%.

Risk Analysis

XLF XLI
Mean Return 1.21 1.14
R-squared 73.26 78.97
Std. Deviation 18.86 17.13
Alpha 2.63 2.38
Beta 1.15 1.08
Sharpe Ratio 0.74 0.76
Treynor Ratio 11.25 11.34

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

The Industrial Select Sector SPDR Fund (XLI) has a Mean Return of 1.14 with a Sharpe Ratio of 0.76 and a R-squared of 78.97. Its Alpha is 2.38 while XLI’s Beta is 1.08. Furthermore, the fund has a Standard Deviation of 17.13 and a Treynor Ratio of 11.34.

XLF’s Mean Return is 0.07 points higher than that of XLI and its R-squared is 5.71 points lower. With a Standard Deviation of 18.86, XLF is slightly more volatile than XLI. The Alpha and Beta of XLF are 0.25 points higher and 0.07 points higher than XLI’s Alpha and Beta.

Performance

Annual Returns

XLF vs. XLI - Annual Returns

Year XLF XLI
2020 -1.68% 11.0%
2019 31.88% 29.11%
2018 -13.09% -13.1%
2017 22.03% 23.85%
2016 22.55% 19.93%
2015 -1.6% -4.27%
2014 15.02% 10.44%
2013 35.37% 40.44%
2012 28.53% 14.86%
2011 -17.16% -1.01%
2010 11.97% 27.62%

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 XLI, returning 40.44% on an annual basis. The poorest year for XLI in the last ten years was 2018, with a yield of -13.1%. Most years the Industrial Select Sector SPDR Fund has given investors modest returns, such as in 2020, 2012, and 2016, when gains were 11.0%, 14.86%, and 19.93% respectively.

Portfolio Growth

XLF vs. XLI - Portfolio Growth

Fund Initial Balance Final Balance CAGR
XLF $10,000 $30,782 12.17%
XLI $10,000 $39,853 14.44%

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 XLI, the end total would have been $39,853. This equates to a $29,853 profit over 11 years and a compound annual growth rate (CAGR) of 14.44%.

XLF’s CAGR is 2.28 percentage points lower than that of XLI and as a result, would have yielded $9,071 less on a $10,000 investment. Thus, XLF performed worse than XLI by 2.28% annually.


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