XLF vs. XLV: What’s The Difference?

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

XLF and XLV 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 XLV over the past ten years.

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

Summary

XLF XLV
Name Financial Select Sector SPDR Fund Health Care Select Sector SPDR Fund
Category Financial Health
Issuer SPDR State Street Global Advisors SPDR State Street Global Advisors
AUM 40.81B 27.88B
Avg. Return 12.17% 15.02%
Div. Yield 1.57% 1.4%
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 Health Care Select Sector SPDR Fund (XLV) is a Health fund that is issued by SPDR State Street Global Advisors. It currently has 27.88B total assets under management and has yielded an average annual return of 15.02% over the past 10 years. The fund has a dividend yield of 1.4% with an expense ratio of 0.12%.

XLF’s dividend yield is 0.17% higher than that of XLV (1.57% vs. 1.4%). Also, XLF yielded on average 2.86% less per year over the past decade (12.17% vs. 15.02%). XLF and XLV have the same expense ratio: 0.12%.

Fund Composition

Industry Exposure

XLF vs. XLV - Industry Exposure

XLF XLV
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% 100.0%
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 Health Care Select Sector SPDR Fund (XLV) has the most exposure to the Healthcare 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.

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

XLV - Holdings

XLV Holdings Weight
Johnson & Johnson 9.19%
UnitedHealth Group Inc 8.01%
Pfizer Inc 4.64%
Abbott Laboratories 4.36%
AbbVie Inc 4.21%
Thermo Fisher Scientific Inc 4.2%
Merck & Co Inc 4.17%
Eli Lilly and Co 3.87%
Danaher Corp 3.61%
Medtronic PLC 3.54%

XLV’s Top Holdings are Johnson & Johnson, UnitedHealth Group Inc, Pfizer Inc, Abbott Laboratories, and AbbVie Inc at 9.19%, 8.01%, 4.64%, 4.36%, and 4.21%.

Thermo Fisher Scientific Inc (4.2%), Merck & Co Inc (4.17%), and Eli Lilly and Co (3.87%) have a slightly smaller but still significant weight. Danaher Corp and Medtronic PLC are also represented in the XLV’s holdings at 3.61% and 3.54%.

Risk Analysis

XLF XLV
Mean Return 1.21 1.27
R-squared 73.26 58.19
Std. Deviation 18.86 12.94
Alpha 2.63 7.75
Beta 1.15 0.7
Sharpe Ratio 0.74 1.13
Treynor Ratio 11.25 21.1

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

The Health Care Select Sector SPDR Fund (XLV) has a Mean Return of 1.27 with a R-squared of 58.19 and a Beta of 0.7. Its Treynor Ratio is 21.1 while XLV’s Alpha is 7.75. Furthermore, the fund has a Sharpe Ratio of 1.13 and a Standard Deviation of 12.94.

XLF’s Mean Return is 0.06 points lower than that of XLV and its R-squared is 15.07 points higher. With a Standard Deviation of 18.86, XLF is slightly more volatile than XLV. The Alpha and Beta of XLF are 5.12 points lower and 0.45 points higher than XLV’s Alpha and Beta.

Performance

Annual Returns

XLF vs. XLV - Annual Returns

Year XLF XLV
2020 -1.68% 13.33%
2019 31.88% 20.63%
2018 -13.09% 6.3%
2017 22.03% 21.7%
2016 22.55% -2.83%
2015 -1.6% 6.82%
2014 15.02% 25.17%
2013 35.37% 41.24%
2012 28.53% 17.56%
2011 -17.16% 12.44%
2010 11.97% 2.91%

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 XLV, returning 41.24% on an annual basis. The poorest year for XLV in the last ten years was 2016, with a yield of -2.83%. Most years the Health Care Select Sector SPDR Fund has given investors modest returns, such as in 2011, 2020, and 2012, when gains were 12.44%, 13.33%, and 17.56% respectively.

Portfolio Growth

XLF vs. XLV - Portfolio Growth

Fund Initial Balance Final Balance CAGR
XLF $10,000 $30,782 12.17%
XLV $10,000 $44,147 15.02%

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 XLV, the end total would have been $44,147. This equates to a $34,147 profit over 11 years and a compound annual growth rate (CAGR) of 15.02%.

XLF’s CAGR is 2.86 percentage points lower than that of XLV and as a result, would have yielded $13,365 less on a $10,000 investment. Thus, XLF performed worse than XLV by 2.86% annually.


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