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XLK vs. DFAC: What’s The Difference?

The Technology Select Sector SPDR Fund (XLK) and the Dimensional U.S. Core Equity 2 ETF (DFAC) are both among the Top 100 ETFs. XLK is a SPDR State Street Global Advisors Technology fund and DFAC is a Dimensional Fund Advisors Large Blend fund. So, what’s the difference between XLK and DFAC? And which fund is better?

The expense ratio of XLK is 0.07 percentage points lower than DFAC’s (0.12% vs. 0.19%). XLK also has a higher exposure to the technology sector and a higher standard deviation. Overall, XLK has provided higher returns than DFAC over the past ten years.

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

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Summary

XLKDFAC
NameTechnology Select Sector SPDR FundDimensional U.S. Core Equity 2 ETF
CategoryTechnologyLarge Blend
IssuerSPDR State Street Global AdvisorsDimensional Fund Advisors
AUM42.3B13.53B
Avg. Return20.02%13.93%
Div. Yield0.73%1.0%
Expense Ratio0.12%0.19%

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 Dimensional U.S. Core Equity 2 ETF (DFAC) is a Large Blend fund that is issued by Dimensional Fund Advisors. It currently has 13.53B total assets under management and has yielded an average annual return of 13.93% over the past 10 years. The fund has a dividend yield of 1.0% with an expense ratio of 0.19%.

XLK’s dividend yield is 0.27% lower than that of DFAC (0.73% vs. 1.0%). Also, XLK yielded on average 6.09% more per year over the past decade (20.02% vs. 13.93%). The expense ratio of XLK is 0.07 percentage points lower than DFAC’s (0.12% vs. 0.19%).

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Fund Composition

Industry Exposure

XLK vs. DFAC - Industry Exposure

XLKDFAC
Technology87.54%22.81%
Industrials1.75%14.13%
Energy0.0%2.67%
Communication Services0.0%7.63%
Utilities0.0%1.54%
Healthcare0.0%12.09%
Consumer Defensive0.0%5.94%
Real Estate0.0%0.37%
Financial Services10.71%16.17%
Consumer Cyclical0.0%13.09%
Basic Materials0.0%3.56%

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 Dimensional U.S. Core Equity 2 ETF (DFAC) has the most exposure to the Technology sector at 22.81%. This is followed by Financial Services and Industrials at 16.17% and 14.13% respectively. Utilities (1.54%), Energy (2.67%), and Basic Materials (3.56%) only make up 7.77% of the fund’s total assets.

DFAC’s mid-section with moderate exposure is comprised of Consumer Defensive, Communication Services, Healthcare, Consumer Cyclical, and Industrials stocks at 5.94%, 7.63%, 12.09%, 13.09%, and 14.13%.

XLK is 64.73% more exposed to the Technology sector than DFAC (87.54% vs 22.81%). XLK’s exposure to Financial Services and Industrials stocks is 5.46% lower and 12.38% lower respectively (10.71% vs. 16.17% and 1.75% vs. 14.13%). In total, Consumer Cyclical, Real Estate, and Consumer Defensive also make up 19.40% less of the fund’s holdings compared to DFAC (0.00% vs. 19.40%).

Holdings

XLK - Holdings

XLK HoldingsWeight
Apple Inc21.45%
Microsoft Corp20.37%
NVIDIA Corp4.98%
Visa Inc Class A3.95%
PayPal Holdings Inc3.42%
Mastercard Inc A3.19%
Adobe Inc2.8%
Salesforce.com Inc2.26%
Intel Corp2.26%
Cisco Systems Inc2.23%

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%.

DFAC - Holdings

DFAC HoldingsWeight
Apple Inc4.7%
Microsoft Corp3.81%
Amazon.com Inc2.39%
Johnson & Johnson1.05%
Facebook Inc Class A1.05%
JPMorgan Chase & Co1.0%
Alphabet Inc Class C0.85%
Alphabet Inc Class A0.84%
Berkshire Hathaway Inc Class B0.75%
Visa Inc Class A0.74%

DFAC’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Johnson & Johnson, and Facebook Inc Class A at 4.7%, 3.81%, 2.39%, 1.05%, and 1.05%.

JPMorgan Chase & Co (1.0%), Alphabet Inc Class C (0.85%), and Alphabet Inc Class A (0.84%) have a slightly smaller but still significant weight. Berkshire Hathaway Inc Class B and Visa Inc Class A are also represented in the DFAC’s holdings at 0.75% and 0.74%.

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Risk Analysis

XLKDFAC
Mean Return1.71.19
R-squared73.5695.1
Std. Deviation15.5815.55
Alpha10.43-2.75
Beta0.951.12
Sharpe Ratio1.270.88
Treynor Ratio21.4411.85

The Technology Select Sector SPDR Fund (XLK) has a Treynor Ratio of 21.44 with a Mean Return of 1.7 and a Sharpe Ratio of 1.27. Its Beta is 0.95 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 Dimensional U.S. Core Equity 2 ETF (DFAC) has a Sharpe Ratio of 0.88 with a Treynor Ratio of 11.85 and a R-squared of 95.1. Its Standard Deviation is 15.55 while DFAC’s Mean Return is 1.19. Furthermore, the fund has a Alpha of -2.75 and a Beta of 1.12.

XLK’s Mean Return is 0.51 points higher than that of DFAC and its R-squared is 21.54 points lower. With a Standard Deviation of 15.58, XLK is slightly more volatile than DFAC. The Alpha and Beta of XLK are 13.18 points higher and 0.17 points lower than DFAC’s Alpha and Beta.

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Performance

Annual Returns

XLK vs. DFAC - Annual Returns

YearXLKDFAC
202043.67%15.8%
201949.97%29.54%
2018-1.56%-9.43%
201734.27%18.82%
201614.81%16.31%
20155.62%-2.53%
201417.75%9.56%
201325.98%37.55%
201215.47%17.93%
20112.69%-1.96%
201011.6%21.67%

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 2013 was the strongest year for DFAC, returning 37.55% on an annual basis. The poorest year for DFAC in the last ten years was 2018, with a yield of -9.43%. Most years the Dimensional U.S. Core Equity 2 ETF has given investors modest returns, such as in 2020, 2016, and 2012, when gains were 15.8%, 16.31%, and 17.93% respectively.

Portfolio Growth

XLK vs. DFAC - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
XLK$10,000$67,79020.02%
DFAC$10,000$38,79613.93%

A $10,000 investment in XLK would have resulted in a final balance of $67,790. This is a profit of $57,790 over 11 years and amounts to a compound annual growth rate (CAGR) of 20.02%.

With a $10,000 investment in DFAC, the end total would have been $38,796. This equates to a $28,796 profit over 11 years and a compound annual growth rate (CAGR) of 13.93%.

XLK’s CAGR is 6.09 percentage points higher than that of DFAC and as a result, would have yielded $28,994 more on a $10,000 investment. Thus, XLK outperformed DFAC by 6.09% annually.


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