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XLK vs. IWN: What’s The Difference?

The Technology Select Sector SPDR Fund (XLK) and the iShares Russell 2000 Value ETF (IWN) are both among the Top 100 ETFs. XLK is a SPDR State Street Global Advisors Technology fund and IWN is a iShares Small Value fund. So, what’s the difference between XLK and IWN? And which fund is better?

The expense ratio of XLK is 0.12 percentage points lower than IWN’s (0.12% vs. 0.24%). XLK also has a higher exposure to the technology sector and a lower standard deviation. Overall, XLK has provided higher returns than IWN over the past ten years.

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

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Summary

XLKIWN
NameTechnology Select Sector SPDR FundiShares Russell 2000 Value ETF
CategoryTechnologySmall Value
IssuerSPDR State Street Global AdvisorsiShares
AUM42.3B15.48B
Avg. Return20.02%10.96%
Div. Yield0.73%1.26%
Expense Ratio0.12%0.24%

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 2000 Value ETF (IWN) is a Small Value fund that is issued by iShares. It currently has 15.48B total assets under management and has yielded an average annual return of 10.96% over the past 10 years. The fund has a dividend yield of 1.26% with an expense ratio of 0.24%.

XLK’s dividend yield is 0.53% lower than that of IWN (0.73% vs. 1.26%). Also, XLK yielded on average 9.06% more per year over the past decade (20.02% vs. 10.96%). The expense ratio of XLK is 0.12 percentage points lower than IWN’s (0.12% vs. 0.24%).

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Fund Composition

Industry Exposure

XLK vs. IWN - Industry Exposure

XLKIWN
Technology87.54%6.02%
Industrials1.75%14.58%
Energy0.0%5.84%
Communication Services0.0%4.17%
Utilities0.0%4.69%
Healthcare0.0%10.94%
Consumer Defensive0.0%3.77%
Real Estate0.0%14.36%
Financial Services10.71%22.97%
Consumer Cyclical0.0%8.39%
Basic Materials0.0%4.29%

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 2000 Value ETF (IWN) has the most exposure to the Financial Services sector at 22.97%. This is followed by Industrials and Real Estate at 14.58% and 14.36% respectively. Communication Services (4.17%), Basic Materials (4.29%), and Utilities (4.69%) only make up 13.15% of the fund’s total assets.

IWN’s mid-section with moderate exposure is comprised of Energy, Technology, Consumer Cyclical, Healthcare, and Real Estate stocks at 5.84%, 6.02%, 8.39%, 10.94%, and 14.36%.

XLK is 81.52% more exposed to the Technology sector than IWN (87.54% vs 6.02%). XLK’s exposure to Financial Services and Industrials stocks is 12.26% lower and 12.83% lower respectively (10.71% vs. 22.97% and 1.75% vs. 14.58%). In total, Consumer Cyclical, Real Estate, and Consumer Defensive also make up 26.52% less of the fund’s holdings compared to IWN (0.00% vs. 26.52%).

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%.

IWN - Holdings

IWN HoldingsWeight
AMC Entertainment Holdings Inc Class A1.06%
Tenet Healthcare Corp0.47%
Stag Industrial Inc0.47%
Ovintiv Inc0.45%
EMCOR Group Inc0.42%
Valley National Bancorp0.37%
Chesapeake Energy Corp Ordinary Shares – New0.37%
Agree Realty Corp0.36%
Macy’s Inc0.35%
Essent Group Ltd0.35%

IWN’s Top Holdings are AMC Entertainment Holdings Inc Class A, Tenet Healthcare Corp, Stag Industrial Inc, Ovintiv Inc, and EMCOR Group Inc at 1.06%, 0.47%, 0.47%, 0.45%, and 0.42%.

Valley National Bancorp (0.37%), Chesapeake Energy Corp Ordinary Shares – New (0.37%), and Agree Realty Corp (0.36%) have a slightly smaller but still significant weight. Macy’s Inc and Essent Group Ltd are also represented in the IWN’s holdings at 0.35% and 0.35%.

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Risk Analysis

XLKIWN
Mean Return1.71.01
R-squared73.5672.64
Std. Deviation15.5819.28
Alpha10.43-6.32
Beta0.951.21
Sharpe Ratio1.270.59
Treynor Ratio21.448.3

The Technology Select Sector SPDR Fund (XLK) has a Mean Return of 1.7 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 R-squared of 73.56.

The iShares Russell 2000 Value ETF (IWN) has a Mean Return of 1.01 with a Treynor Ratio of 8.3 and a Alpha of -6.32. Its R-squared is 72.64 while IWN’s Standard Deviation is 19.28. Furthermore, the fund has a Beta of 1.21 and a Sharpe Ratio of 0.59.

XLK’s Mean Return is 0.69 points higher than that of IWN and its R-squared is 0.92 points higher. With a Standard Deviation of 15.58, XLK is slightly less volatile than IWN. The Alpha and Beta of XLK are 16.75 points higher and 0.26 points lower than IWN’s Alpha and Beta.

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Performance

Annual Returns

XLK vs. IWN - Annual Returns

YearXLKIWN
202043.67%4.5%
201949.97%22.17%
2018-1.56%-12.94%
201734.27%7.73%
201614.81%31.64%
20155.62%-7.53%
201417.75%4.13%
201325.98%34.3%
201215.47%17.92%
20112.69%-5.64%
201011.6%24.29%

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 IWN, returning 34.3% on an annual basis. The poorest year for IWN in the last ten years was 2018, with a yield of -12.94%. Most years the iShares Russell 2000 Value ETF has given investors modest returns, such as in 2020, 2017, and 2012, when gains were 4.5%, 7.73%, and 17.92% respectively.

Portfolio Growth

XLK vs. IWN - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
XLK$10,000$67,79020.02%
IWN$10,000$28,18910.96%

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 IWN, the end total would have been $28,189. This equates to a $18,189 profit over 11 years and a compound annual growth rate (CAGR) of 10.96%.

XLK’s CAGR is 9.06 percentage points higher than that of IWN and as a result, would have yielded $39,601 more on a $10,000 investment. Thus, XLK outperformed IWN by 9.06% annually.


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