XLK vs. ARKK: What’s The Difference?

The Technology Select Sector SPDR Fund (XLK) and the ARK Innovation ETF (ARKK) are both among the Top 100 ETFs. XLK is a SPDR State Street Global Advisors Technology fund and ARKK is a ARK ETF Trust Mid-Cap Growth fund. So, what’s the difference between XLK and ARKK? And which fund is better?

The expense ratio of XLK is 0.63 percentage points lower than ARKK’s (0.12% vs. 0.75%). XLK also has a higher exposure to the technology sector and a higher standard deviation. Overall, XLK has provided lower returns than ARKK over the past ten years.

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

Summary

XLK ARKK
Name Technology Select Sector SPDR Fund ARK Innovation ETF
Category Technology Mid-Cap Growth
Issuer SPDR State Street Global Advisors ARK ETF Trust
AUM 42.3B 25.52B
Avg. Return 20.02% 55.45%
Div. Yield 0.73% 0.0%
Expense Ratio 0.12% 0.75%

The Technology Select Sector SPDR Fund (XLK) is a Technology fund that is issued by SPDR State Street Global Advisors. It currently has 42.3B total assets under management and has yielded an average annual return of 20.02% over the past 10 years. The fund has a dividend yield of 0.73% with an expense ratio of 0.12%.

The ARK Innovation ETF (ARKK) is a Mid-Cap Growth fund that is issued by ARK ETF Trust. It currently has 25.52B total assets under management and has yielded an average annual return of 55.45% over the past 10 years. The fund has a dividend yield of 0.0% with an expense ratio of 0.75%.

XLK’s dividend yield is 0.73% higher than that of ARKK (0.73% vs. 0.0%). Also, XLK yielded on average 35.43% less per year over the past decade (20.02% vs. 55.45%). The expense ratio of XLK is 0.63 percentage points lower than ARKK’s (0.12% vs. 0.75%).

Fund Composition

Industry Exposure

XLK vs. ARKK - Industry Exposure

XLK ARKK
Technology 87.54% 30.5%
Industrials 1.75% 2.11%
Energy 0.0% 0.0%
Communication Services 0.0% 25.01%
Utilities 0.0% 0.0%
Healthcare 0.0% 29.47%
Consumer Defensive 0.0% 0.93%
Real Estate 0.0% 0.51%
Financial Services 10.71% 0.04%
Consumer Cyclical 0.0% 11.42%
Basic Materials 0.0% 0.0%

The Technology Select Sector SPDR Fund (XLK) has the most exposure to the Technology sector at 87.54%. This is followed by Financial Services and Industrials at 10.71% and 1.75% 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.

XLK’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 1.75%.

The ARK Innovation ETF (ARKK) has the most exposure to the Technology sector at 30.5%. This is followed by Healthcare and Communication Services at 29.47% and 25.01% respectively. Utilities (0.0%), Energy (0.0%), and Financial Services (0.04%) only make up 0.04% of the fund’s total assets.

ARKK’s mid-section with moderate exposure is comprised of Real Estate, Consumer Defensive, Industrials, Consumer Cyclical, and Communication Services stocks at 0.51%, 0.93%, 2.11%, 11.42%, and 25.01%.

XLK is 57.04% more exposed to the Technology sector than ARKK (87.54% vs 30.5%). XLK’s exposure to Financial Services and Industrials stocks is 10.67% higher and 0.36% lower respectively (10.71% vs. 0.04% and 1.75% vs. 2.11%). In total, Consumer Cyclical, Real Estate, and Consumer Defensive also make up 12.86% less of the fund’s holdings compared to ARKK (0.00% vs. 12.86%).

Holdings

XLK - Holdings

XLK Holdings Weight
Apple Inc 21.45%
Microsoft Corp 20.37%
NVIDIA Corp 4.98%
Visa Inc Class A 3.95%
PayPal Holdings Inc 3.42%
Mastercard Inc A 3.19%
Adobe Inc 2.8%
Salesforce.com Inc 2.26%
Intel Corp 2.26%
Cisco Systems Inc 2.23%

XLK’s Top Holdings are Apple Inc, Microsoft Corp, NVIDIA Corp, Visa Inc Class A, and PayPal Holdings Inc at 21.45%, 20.37%, 4.98%, 3.95%, and 3.42%.

Mastercard Inc A (3.19%), Adobe Inc (2.8%), and Salesforce.com Inc (2.26%) have a slightly smaller but still significant weight. Intel Corp and Cisco Systems Inc are also represented in the XLK’s holdings at 2.26% and 2.23%.

ARKK - Holdings

ARKK Holdings Weight
Tesla Inc 9.56%
Roku Inc Class A 6.48%
Teladoc Health Inc 5.76%
Square Inc A 4.37%
Zoom Video Communications Inc 4.36%
Shopify Inc A 4.27%
Spotify Technology SA 3.68%
Twilio Inc A 3.66%
Coinbase Global Inc Ordinary Shares – Class A 3.65%
Unity Software Inc Ordinary Shares 3.41%

ARKK’s Top Holdings are Tesla Inc, Roku Inc Class A, Teladoc Health Inc, Square Inc A, and Zoom Video Communications Inc at 9.56%, 6.48%, 5.76%, 4.37%, and 4.36%.

Shopify Inc A (4.27%), Spotify Technology SA (3.68%), and Twilio Inc A (3.66%) have a slightly smaller but still significant weight. Coinbase Global Inc Ordinary Shares – Class A and Unity Software Inc Ordinary Shares are also represented in the ARKK’s holdings at 3.65% and 3.41%.

Risk Analysis

XLK ARKK
Mean Return 1.7 0
R-squared 73.56 0
Std. Deviation 15.58 0
Alpha 10.43 0
Beta 0.95 0
Sharpe Ratio 1.27 0
Treynor Ratio 21.44 0

The Technology Select Sector SPDR Fund (XLK) has a Beta of 0.95 with a Treynor Ratio of 21.44 and a Mean Return of 1.7. Its Sharpe Ratio is 1.27 while XLK’s Standard Deviation is 15.58. Furthermore, the fund has a R-squared of 73.56 and a Alpha of 10.43.

The ARK Innovation ETF (ARKK) has a Mean Return of 0 with a Standard Deviation of 0 and a Sharpe Ratio of 0. Its Alpha is 0 while ARKK’s Treynor Ratio is 0. Furthermore, the fund has a Beta of 0 and a R-squared of 0.

XLK’s Mean Return is 1.70 points higher than that of ARKK and its R-squared is 73.56 points higher. With a Standard Deviation of 15.58, XLK is slightly more volatile than ARKK. The Alpha and Beta of XLK are 10.43 points higher and 0.95 points higher than ARKK’s Alpha and Beta.

Performance

Annual Returns

XLK vs. ARKK - Annual Returns

Year XLK ARKK
2020 43.67% 152.52%
2019 49.97% 35.73%
2018 -1.56% 3.58%
2017 34.27% 87.38%
2016 14.81% -1.96%
2015 5.62% 3.76%
2014 17.75% 0.0%
2013 25.98% 0.0%
2012 15.47% 0.0%
2011 2.69% 0.0%
2010 11.6% 0.0%

XLK had its best year in 2019 with an annual return of 49.97%. XLK’s worst year over the past decade yielded -1.56% and occurred in 2018. In most years the Technology Select Sector SPDR Fund provided moderate returns such as in 2016, 2012, and 2014 where annual returns amounted to 14.81%, 15.47%, and 17.75% respectively.

The year 2020 was the strongest year for ARKK, returning 152.52% on an annual basis. The poorest year for ARKK in the last ten years was 2016, with a yield of -1.96%. Most years the ARK Innovation ETF has given investors modest returns, such as in 2011, 2010, and 2018, when gains were 0.0%, 0.0%, and 3.58% respectively.

Portfolio Growth

XLK vs. ARKK - Portfolio Growth

Fund Initial Balance Final Balance CAGR
XLK $10,000 $32,696 20.02%
ARKK $10,000 $65,218 55.45%

A $10,000 investment in XLK would have resulted in a final balance of $32,696. This is a profit of $22,696 over 5 years and amounts to a compound annual growth rate (CAGR) of 20.02%.

With a $10,000 investment in ARKK, the end total would have been $65,218. This equates to a $55,218 profit over 5 years and a compound annual growth rate (CAGR) of 55.45%.

XLK’s CAGR is 35.43 percentage points lower than that of ARKK and as a result, would have yielded $32,522 less on a $10,000 investment. Thus, XLK performed worse than ARKK by 35.43% annually.


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