The Technology Select Sector SPDR Fund (XLK) and the iShares U.S. Treasury Bond ETF (GOVT) are both among the Top 100 ETFs. XLK is a SPDR State Street Global Advisors Technology fund and GOVT is a iShares Intermediate Government fund. So, what’s the difference between XLK and GOVT? And which fund is better?
The expense ratio of XLK is 0.07 percentage points higher than GOVT’s (0.12% vs. 0.05%). XLK also has a high exposure to the technology sector while GOVT is mostly comprised of AAA bonds. Overall, XLK has provided higher returns than GOVT over the past ten years.
In this article, we’ll compare XLK vs. GOVT. We’ll look at portfolio growth and annual returns, as well as at their fund composition and risk metrics. Moreover, I’ll also discuss XLK’s and GOVT’s performance, holdings, and industry exposure and examine how these affect their overall returns.
|Name||Technology Select Sector SPDR Fund||iShares U.S. Treasury Bond ETF|
|Issuer||SPDR State Street Global Advisors||iShares|
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 iShares U.S. Treasury Bond ETF (GOVT) is a Intermediate Government fund that is issued by iShares. It currently has 17.07B total assets under management and has yielded an average annual return of 2.67% over the past 10 years. The fund has a dividend yield of 1.0% with an expense ratio of 0.05%.
XLK’s dividend yield is 0.27% lower than that of GOVT (0.73% vs. 1.0%). Also, XLK yielded on average 17.35% more per year over the past decade (20.02% vs. 2.67%). The expense ratio of XLK is 0.07 percentage points higher than GOVT’s (0.12% vs. 0.05%).
|Visa Inc Class A||3.95%|
|PayPal Holdings Inc||3.42%|
|Mastercard Inc A||3.19%|
|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%.
|GOVT Bond Sectors||Weight|
GOVT’s Top Bond Sectors are ratings of AAA, Others, Below B, B, and BB at 100.0%, 0.0%, 0.0%, 0.0%, and 0.0%. The fund is less weighted towards BBB (0.0%), A (0.0%), and AA (0.0%) rated bonds.
The Technology Select Sector SPDR Fund (XLK) has a Standard Deviation of 15.58 with a R-squared of 73.56 and a Mean Return of 1.7. Its Sharpe Ratio is 1.27 while XLK’s Beta is 0.95. Furthermore, the fund has a Treynor Ratio of 21.44 and a Alpha of 10.43.
The iShares U.S. Treasury Bond ETF (GOVT) has a Sharpe Ratio of 0 with a Alpha of 0 and a Treynor Ratio of 0. Its Mean Return is 0 while GOVT’s Beta is 0. Furthermore, the fund has a Standard Deviation of 0 and a R-squared of 0.
XLK’s Mean Return is 1.70 points higher than that of GOVT and its R-squared is 73.56 points higher. With a Standard Deviation of 15.58, XLK is slightly more volatile than GOVT. The Alpha and Beta of XLK are 10.43 points higher and 0.95 points higher than GOVT’s Alpha and Beta.
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 GOVT, returning 7.92% on an annual basis. The poorest year for GOVT in the last ten years was 2013, with a yield of -2.84%. Most years the iShares U.S. Treasury Bond ETF has given investors modest returns, such as in 2018, 2015, and 2016, when gains were 0.74%, 0.76%, and 0.92% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in XLK would have resulted in a final balance of $51,228. This is a profit of $41,228 over 8 years and amounts to a compound annual growth rate (CAGR) of 20.02%.
With a $10,000 investment in GOVT, the end total would have been $12,297. This equates to a $2,297 profit over 8 years and a compound annual growth rate (CAGR) of 2.67%.
XLK’s CAGR is 17.35 percentage points higher than that of GOVT and as a result, would have yielded $38,931 more on a $10,000 investment. Thus, XLK outperformed GOVT by 17.35% annually.
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