XLI vs. TQQQ: What’s The Difference?

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

The expense ratio of XLI is 0.83 percentage points lower than TQQQ’s (0.12% vs. 0.95%). XLI also has a higher exposure to the industrials sector and a lower standard deviation. Overall, XLI has provided lower returns than TQQQ over the past 10 years.

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

Summary

XLI TQQQ
Name Industrial Select Sector SPDR Fund ProShares UltraPro QQQ
Category Industrials Trading–Leveraged Equity
Issuer SPDR State Street Global Advisors ProShares
AUM 19.33B 12.41B
Avg. Return 14.44% 61.22%
Div. Yield 1.25% 0.0%
Expense Ratio 0.12% 0.95%

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%.

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%.

XLI’s dividend yield is 1.25% higher than that of TQQQ (1.25% vs. 0.0%). Also, XLI yielded on average 46.78% less per year over the past decade (14.44% vs. 61.22%). The expense ratio of XLI is 0.83 percentage points lower than TQQQ’s (0.12% vs. 0.95%).

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Fund Composition

Industry Exposure

XLI vs. TQQQ - Industry Exposure

XLI TQQQ
Technology 1.82% 0.0%
Industrials 97.49% 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 0.0% 0.0%
Consumer Cyclical 0.69% 0.0%
Basic Materials 0.0% 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%.

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%.

XLI is 97.49% more exposed to the Industrials sector than TQQQ (97.49% vs 0.0%). XLI’s exposure to Technology and Consumer Cyclical stocks is 1.82% higher and 0.69% higher respectively (1.82% vs. 0.0% and 0.69% vs. 0.0%). In total, Financial Services, 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

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%.

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%.

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Risk Analysis

XLI TQQQ
Mean Return 1.14 4.65
R-squared 78.97 83.64
Std. Deviation 17.13 50.08
Alpha 2.38 7.29
Beta 1.08 3.37
Sharpe Ratio 0.76 1.1
Treynor Ratio 11.34 15.65

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

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

XLI’s Mean Return is 3.51 points lower than that of TQQQ and its R-squared is 4.67 points lower. With a Standard Deviation of 17.13, XLI is slightly less volatile than TQQQ. The Alpha and Beta of XLI are 4.91 points lower and 2.29 points lower than TQQQ’s Alpha and Beta.

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Performance

Annual Returns

XLI vs. TQQQ - Annual Returns

Year XLI TQQQ
2020 11.0% 109.85%
2019 29.11% 133.93%
2018 -13.1% -19.65%
2017 23.85% 118.65%
2016 19.93% 11.04%
2015 -4.27% 17.41%
2014 10.44% 56.82%
2013 40.44% 139.98%
2012 14.86% 51.95%
2011 -1.01% -7.77%
2010 27.62% 0.0%

XLI had its best year in 2013 with an annual return of 40.44%. XLI’s worst year over the past decade yielded -13.1% and occurred in 2018. In most years the Industrial Select Sector SPDR Fund provided moderate returns such as in 2020, 2012, and 2016 where annual returns amounted to 11.0%, 14.86%, and 19.93% 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

XLI vs. TQQQ - Portfolio Growth

Fund Initial Balance Final Balance CAGR
XLI $10,000 $31,228 14.44%
TQQQ $10,000 $593,012 61.22%

A $10,000 investment in XLI would have resulted in a final balance of $31,228. This is a profit of $21,228 over 10 years and amounts to a compound annual growth rate (CAGR) of 14.44%.

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%.

XLI’s CAGR is 46.78 percentage points lower than that of TQQQ and as a result, would have yielded $561,784 less on a $10,000 investment. Thus, XLI performed worse than TQQQ by 46.78% annually.


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