XLK vs. IWB: What’s The Difference?

The Technology Select Sector SPDR Fund (XLK) and the iShares Russell 1000 ETF (IWB) are both among the Top 100 ETFs. XLK is a SPDR State Street Global Advisors Technology fund and IWB is a iShares Large Blend fund. So, what’s the difference between XLK and IWB? And which fund is better?

The expense ratio of XLK is 0.03 percentage points lower than IWB’s (0.12% vs. 0.15%). XLK also has a higher exposure to the technology sector and a higher standard deviation. Overall, XLK has provided higher returns than IWB over the past ten years.

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

Summary

XLK IWB
Name Technology Select Sector SPDR Fund iShares Russell 1000 ETF
Category Technology Large Blend
Issuer SPDR State Street Global Advisors iShares
AUM 42.3B 30.54B
Avg. Return 20.02% 14.64%
Div. Yield 0.73% 1.14%
Expense Ratio 0.12% 0.15%

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 Russell 1000 ETF (IWB) is a Large Blend fund that is issued by iShares. It currently has 30.54B total assets under management and has yielded an average annual return of 14.64% over the past 10 years. The fund has a dividend yield of 1.14% with an expense ratio of 0.15%.

XLK’s dividend yield is 0.41% lower than that of IWB (0.73% vs. 1.14%). Also, XLK yielded on average 5.39% more per year over the past decade (20.02% vs. 14.64%). The expense ratio of XLK is 0.03 percentage points lower than IWB’s (0.12% vs. 0.15%).

Fund Composition

Industry Exposure

XLK vs. IWB - Industry Exposure

XLK IWB
Technology 87.54% 25.33%
Industrials 1.75% 8.88%
Energy 0.0% 2.44%
Communication Services 0.0% 10.83%
Utilities 0.0% 2.36%
Healthcare 0.0% 13.35%
Consumer Defensive 0.0% 5.97%
Real Estate 0.0% 3.34%
Financial Services 10.71% 13.64%
Consumer Cyclical 0.0% 11.85%
Basic Materials 0.0% 2.02%

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 Russell 1000 ETF (IWB) has the most exposure to the Technology sector at 25.33%. This is followed by Financial Services and Healthcare at 13.64% and 13.35% respectively. Utilities (2.36%), Energy (2.44%), and Real Estate (3.34%) only make up 8.14% of the fund’s total assets.

IWB’s mid-section with moderate exposure is comprised of Consumer Defensive, Industrials, Communication Services, Consumer Cyclical, and Healthcare stocks at 5.97%, 8.88%, 10.83%, 11.85%, and 13.35%.

XLK is 62.21% more exposed to the Technology sector than IWB (87.54% vs 25.33%). XLK’s exposure to Financial Services and Industrials stocks is 2.93% lower and 7.13% lower respectively (10.71% vs. 13.64% and 1.75% vs. 8.88%). In total, Consumer Cyclical, Real Estate, and Consumer Defensive also make up 21.16% less of the fund’s holdings compared to IWB (0.00% vs. 21.16%).

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%.

IWB - Holdings

IWB Holdings Weight
Apple Inc 5.45%
Microsoft Corp 5.11%
Amazon.com Inc 3.43%
Facebook Inc Class A 2.03%
Alphabet Inc Class A 1.93%
Alphabet Inc Class C 1.82%
Tesla Inc 1.27%
Berkshire Hathaway Inc Class B 1.24%
NVIDIA Corp 1.11%
JPMorgan Chase & Co 1.09%

IWB’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc Class A, and Alphabet Inc Class A at 5.45%, 5.11%, 3.43%, 2.03%, and 1.93%.

Alphabet Inc Class C (1.82%), Tesla Inc (1.27%), and Berkshire Hathaway Inc Class B (1.24%) have a slightly smaller but still significant weight. NVIDIA Corp and JPMorgan Chase & Co are also represented in the IWB’s holdings at 1.11% and 1.09%.

Risk Analysis

XLK IWB
Mean Return 1.7 1.27
R-squared 73.56 99.73
Std. Deviation 15.58 13.87
Alpha 10.43 -0.38
Beta 0.95 1.02
Sharpe Ratio 1.27 1.05
Treynor Ratio 21.44 14.31

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

The iShares Russell 1000 ETF (IWB) has a R-squared of 99.73 with a Alpha of -0.38 and a Beta of 1.02. Its Mean Return is 1.27 while IWB’s Treynor Ratio is 14.31. Furthermore, the fund has a Sharpe Ratio of 1.05 and a Standard Deviation of 13.87.

XLK’s Mean Return is 0.43 points higher than that of IWB and its R-squared is 26.17 points lower. With a Standard Deviation of 15.58, XLK is slightly more volatile than IWB. The Alpha and Beta of XLK are 10.81 points higher and 0.07 points lower than IWB’s Alpha and Beta.

Performance

Annual Returns

XLK vs. IWB - Annual Returns

Year XLK IWB
2020 43.67% 20.8%
2019 49.97% 31.26%
2018 -1.56% -4.91%
2017 34.27% 21.53%
2016 14.81% 11.91%
2015 5.62% 0.82%
2014 17.75% 13.08%
2013 25.98% 32.93%
2012 15.47% 16.27%
2011 2.69% 1.36%
2010 11.6% 15.94%

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 IWB, returning 32.93% on an annual basis. The poorest year for IWB in the last ten years was 2018, with a yield of -4.91%. Most years the iShares Russell 1000 ETF has given investors modest returns, such as in 2014, 2010, and 2012, when gains were 13.08%, 15.94%, and 16.27% respectively.

Portfolio Growth

XLK vs. IWB - Portfolio Growth

Fund Initial Balance Final Balance CAGR
XLK $10,000 $67,790 20.02%
IWB $10,000 $42,462 14.64%

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 IWB, the end total would have been $42,462. This equates to a $32,462 profit over 11 years and a compound annual growth rate (CAGR) of 14.64%.

XLK’s CAGR is 5.39 percentage points higher than that of IWB and as a result, would have yielded $25,328 more on a $10,000 investment. Thus, XLK outperformed IWB by 5.39% annually.


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