The Technology Select Sector SPDR Fund (XLK) and the iShares Core Total USD Bond Market ETF (IUSB) are both among the Top 100 ETFs. XLK is a SPDR State Street Global Advisors Technology fund and IUSB is a iShares N/A fund. So, what’s the difference between XLK and IUSB? And which fund is better?
The expense ratio of XLK is 0.06 percentage points higher than IUSB’s (0.12% vs. 0.06%). XLK also has a high exposure to the technology sector while IUSB is mostly comprised of AAA bonds. Overall, XLK has provided higher returns than IUSB over the past ten years.
In this article, we’ll compare XLK vs. IUSB. We’ll look at risk metrics and performance, as well as at their holdings and portfolio growth. Moreover, I’ll also discuss XLK’s and IUSB’s industry exposure, fund composition, and annual returns and examine how these affect their overall returns.
|Name||Technology Select Sector SPDR Fund||iShares Core Total USD Bond Market 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 Core Total USD Bond Market ETF (IUSB) is a N/A fund that is issued by iShares. It currently has 14.49B total assets under management and has yielded an average annual return of 4.13% over the past 10 years. The fund has a dividend yield of 2.1% with an expense ratio of 0.06%.
XLK’s dividend yield is 1.37% lower than that of IUSB (0.73% vs. 2.1%). Also, XLK yielded on average 15.90% more per year over the past decade (20.02% vs. 4.13%). The expense ratio of XLK is 0.06 percentage points higher than IUSB’s (0.12% vs. 0.06%).
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|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%.
|IUSB Bond Sectors||Weight|
IUSB’s Top Bond Sectors are ratings of AAA, BBB, A, BB, and AA at 58.32%, 16.98%, 12.27%, 4.33%, and 3.36%. The fund is less weighted towards B (2.8%), Others (1.01%), and Below B (0.92%) rated bonds.
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The Technology Select Sector SPDR Fund (XLK) has a Beta of 0.95 with a Sharpe Ratio of 1.27 and a Treynor Ratio of 21.44. Its Standard Deviation is 15.58 while XLK’s R-squared is 73.56. Furthermore, the fund has a Alpha of 10.43 and a Mean Return of 1.7.
The iShares Core Total USD Bond Market ETF (IUSB) has a Sharpe Ratio of 0 with a Alpha of 0 and a Mean Return of 0. Its Beta is 0 while IUSB’s R-squared is 0. Furthermore, the fund has a Treynor Ratio of 0 and a Standard Deviation of 0.
XLK’s Mean Return is 1.70 points higher than that of IUSB and its R-squared is 73.56 points higher. With a Standard Deviation of 15.58, XLK is slightly more volatile than IUSB. The Alpha and Beta of XLK are 10.43 points higher and 0.95 points higher than IUSB’s Alpha and Beta.
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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 2019 was the strongest year for IUSB, returning 9.26% on an annual basis. The poorest year for IUSB in the last ten years was 2018, with a yield of -0.38%. Most years the iShares Core Total USD Bond Market ETF has given investors modest returns, such as in 2011, 2010, and 2015, when gains were 0.0%, 0.0%, and 0.46% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in XLK would have resulted in a final balance of $34,534. This is a profit of $24,534 over 6 years and amounts to a compound annual growth rate (CAGR) of 20.02%.
With a $10,000 investment in IUSB, the end total would have been $12,704. This equates to a $2,704 profit over 6 years and a compound annual growth rate (CAGR) of 4.13%.
XLK’s CAGR is 15.90 percentage points higher than that of IUSB and as a result, would have yielded $21,830 more on a $10,000 investment. Thus, XLK outperformed IUSB by 15.90% annually.
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