XLK vs. ITOT: What’s The Difference?

The Technology Select Sector SPDR Fund (XLK) and the iShares Core S&P Total U.S. Stock Market ETF (ITOT) are both among the Top 100 ETFs. XLK is a SPDR State Street Global Advisors Technology fund and ITOT is a iShares Large Blend fund. So, what’s the difference between XLK and ITOT? And which fund is better?

The expense ratio of XLK is 0.09 percentage points higher than ITOT’s (0.12% vs. 0.03%). XLK also has a higher exposure to the technology sector and a higher standard deviation. Overall, XLK has provided higher returns than ITOT over the past ten years.

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

Summary

XLK ITOT
Name Technology Select Sector SPDR Fund iShares Core S&P Total U.S. Stock Market ETF
Category Technology Large Blend
Issuer SPDR State Street Global Advisors iShares
AUM 42.3B 41.97B
Avg. Return 20.02% 14.59%
Div. Yield 0.73% 1.2%
Expense Ratio 0.12% 0.03%

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 Core S&P Total U.S. Stock Market ETF (ITOT) is a Large Blend fund that is issued by iShares. It currently has 41.97B total assets under management and has yielded an average annual return of 14.59% over the past 10 years. The fund has a dividend yield of 1.2% with an expense ratio of 0.03%.

XLK’s dividend yield is 0.47% lower than that of ITOT (0.73% vs. 1.2%). Also, XLK yielded on average 5.43% more per year over the past decade (20.02% vs. 14.59%). The expense ratio of XLK is 0.09 percentage points higher than ITOT’s (0.12% vs. 0.03%).

Fund Composition

Industry Exposure

XLK vs. ITOT - Industry Exposure

XLK ITOT
Technology 87.54% 24.49%
Industrials 1.75% 9.21%
Energy 0.0% 2.51%
Communication Services 0.0% 10.54%
Utilities 0.0% 2.35%
Healthcare 0.0% 13.59%
Consumer Defensive 0.0% 5.79%
Real Estate 0.0% 3.67%
Financial Services 10.71% 13.69%
Consumer Cyclical 0.0% 11.69%
Basic Materials 0.0% 2.47%

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 iShares Core S&P Total U.S. Stock Market ETF (ITOT) has the most exposure to the Technology sector at 24.49%. This is followed by Financial Services and Healthcare at 13.69% and 13.59% respectively. Basic Materials (2.47%), Energy (2.51%), and Real Estate (3.67%) only make up 8.65% of the fund’s total assets.

ITOT’s mid-section with moderate exposure is comprised of Consumer Defensive, Industrials, Communication Services, Consumer Cyclical, and Healthcare stocks at 5.79%, 9.21%, 10.54%, 11.69%, and 13.59%.

XLK is 63.05% more exposed to the Technology sector than ITOT (87.54% vs 24.49%). XLK’s exposure to Financial Services and Industrials stocks is 2.98% lower and 7.46% lower respectively (10.71% vs. 13.69% and 1.75% vs. 9.21%). In total, Consumer Cyclical, Real Estate, and Consumer Defensive also make up 21.15% less of the fund’s holdings compared to ITOT (0.00% vs. 21.15%).

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%.

ITOT - Holdings

ITOT Holdings Weight
Apple Inc 5.07%
Microsoft Corp 4.75%
Amazon.com Inc 3.16%
Facebook Inc Class A 1.89%
Alphabet Inc Class A 1.79%
Alphabet Inc Class C 1.71%
Tesla Inc 1.17%
Berkshire Hathaway Inc Class B 1.17%
NVIDIA Corp 1.08%
JPMorgan Chase & Co 1.02%

ITOT’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc Class A, and Alphabet Inc Class A at 5.07%, 4.75%, 3.16%, 1.89%, and 1.79%.

Alphabet Inc Class C (1.71%), Tesla Inc (1.17%), and Berkshire Hathaway Inc Class B (1.17%) have a slightly smaller but still significant weight. NVIDIA Corp and JPMorgan Chase & Co are also represented in the ITOT’s holdings at 1.08% and 1.02%.

Risk Analysis

XLK ITOT
Mean Return 1.7 1.27
R-squared 73.56 99.4
Std. Deviation 15.58 14.02
Alpha 10.43 -0.54
Beta 0.95 1.03
Sharpe Ratio 1.27 1.04
Treynor Ratio 21.44 14.13

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

The iShares Core S&P Total U.S. Stock Market ETF (ITOT) has a Treynor Ratio of 14.13 with a R-squared of 99.4 and a Standard Deviation of 14.02. Its Alpha is -0.54 while ITOT’s Beta is 1.03. Furthermore, the fund has a Sharpe Ratio of 1.04 and a Mean Return of 1.27.

XLK’s Mean Return is 0.43 points higher than that of ITOT and its R-squared is 25.84 points lower. With a Standard Deviation of 15.58, XLK is slightly more volatile than ITOT. The Alpha and Beta of XLK are 10.97 points higher and 0.08 points lower than ITOT’s Alpha and Beta.

Performance

Annual Returns

XLK vs. ITOT - Annual Returns

Year XLK ITOT
2020 43.67% 20.75%
2019 49.97% 30.87%
2018 -1.56% -5.27%
2017 34.27% 21.23%
2016 14.81% 12.59%
2015 5.62% 0.96%
2014 17.75% 13.01%
2013 25.98% 32.67%
2012 15.47% 15.98%
2011 2.69% 1.55%
2010 11.6% 16.15%

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 ITOT, returning 32.67% on an annual basis. The poorest year for ITOT in the last ten years was 2018, with a yield of -5.27%. Most years the iShares Core S&P Total U.S. Stock Market ETF has given investors modest returns, such as in 2014, 2012, and 2010, when gains were 13.01%, 15.98%, and 16.15% respectively.

Portfolio Growth

XLK vs. ITOT - Portfolio Growth

Fund Initial Balance Final Balance CAGR
XLK $10,000 $67,790 20.02%
ITOT $10,000 $42,310 14.59%

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 ITOT, the end total would have been $42,310. This equates to a $32,310 profit over 11 years and a compound annual growth rate (CAGR) of 14.59%.

XLK’s CAGR is 5.43 percentage points higher than that of ITOT and as a result, would have yielded $25,480 more on a $10,000 investment. Thus, XLK outperformed ITOT by 5.43% annually.


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