XLK vs. IWR: What’s The Difference?

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

The expense ratio of XLK is 0.07 percentage points lower than IWR’s (0.12% vs. 0.19%). XLK also has a higher exposure to the technology sector and a lower standard deviation. Overall, XLK has provided higher returns than IWR over the past ten years.

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

Summary

XLK IWR
Name Technology Select Sector SPDR Fund iShares Russell Mid-Cap ETF
Category Technology Mid-Cap Blend
Issuer SPDR State Street Global Advisors iShares
AUM 42.3B 29.84B
Avg. Return 20.02% 14.15%
Div. Yield 0.73% 0.99%
Expense Ratio 0.12% 0.19%

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 Mid-Cap ETF (IWR) is a Mid-Cap Blend fund that is issued by iShares. It currently has 29.84B total assets under management and has yielded an average annual return of 14.15% over the past 10 years. The fund has a dividend yield of 0.99% with an expense ratio of 0.19%.

XLK’s dividend yield is 0.26% lower than that of IWR (0.73% vs. 0.99%). Also, XLK yielded on average 5.87% more per year over the past decade (20.02% vs. 14.15%). The expense ratio of XLK is 0.07 percentage points lower than IWR’s (0.12% vs. 0.19%).

Fund Composition

Industry Exposure

XLK vs. IWR - Industry Exposure

XLK IWR
Technology 87.54% 19.67%
Industrials 1.75% 14.54%
Energy 0.0% 3.48%
Communication Services 0.0% 4.64%
Utilities 0.0% 4.46%
Healthcare 0.0% 11.76%
Consumer Defensive 0.0% 3.82%
Real Estate 0.0% 8.31%
Financial Services 10.71% 11.64%
Consumer Cyclical 0.0% 13.59%
Basic Materials 0.0% 4.1%

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 Mid-Cap ETF (IWR) has the most exposure to the Technology sector at 19.67%. This is followed by Industrials and Consumer Cyclical at 14.54% and 13.59% respectively. Consumer Defensive (3.82%), Basic Materials (4.1%), and Utilities (4.46%) only make up 12.38% of the fund’s total assets.

IWR’s mid-section with moderate exposure is comprised of Communication Services, Real Estate, Financial Services, Healthcare, and Consumer Cyclical stocks at 4.64%, 8.31%, 11.64%, 11.76%, and 13.59%.

XLK is 67.87% more exposed to the Technology sector than IWR (87.54% vs 19.67%). XLK’s exposure to Financial Services and Industrials stocks is 0.93% lower and 12.79% lower respectively (10.71% vs. 11.64% and 1.75% vs. 14.54%). In total, Consumer Cyclical, Real Estate, and Consumer Defensive also make up 25.72% less of the fund’s holdings compared to IWR (0.00% vs. 25.72%).

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%.

IWR - Holdings

IWR Holdings Weight
IDEXX Laboratories Inc 0.51%
DocuSign Inc 0.51%
Twitter Inc 0.48%
Chipotle Mexican Grill Inc 0.47%
Roku Inc Class A 0.44%
Marvell Technology Inc 0.44%
DexCom Inc 0.44%
Trane Technologies PLC 0.43%
MSCI Inc 0.43%
Carrier Global Corp Ordinary Shares 0.43%

IWR’s Top Holdings are IDEXX Laboratories Inc, DocuSign Inc, Twitter Inc, Chipotle Mexican Grill Inc, and Roku Inc Class A at 0.51%, 0.51%, 0.48%, 0.47%, and 0.44%.

Marvell Technology Inc (0.44%), DexCom Inc (0.44%), and Trane Technologies PLC (0.43%) have a slightly smaller but still significant weight. MSCI Inc and Carrier Global Corp Ordinary Shares are also represented in the IWR’s holdings at 0.43% and 0.43%.

Risk Analysis

XLK IWR
Mean Return 1.7 1.17
R-squared 73.56 91.52
Std. Deviation 15.58 15.66
Alpha 10.43 -2.8
Beta 0.95 1.11
Sharpe Ratio 1.27 0.86
Treynor Ratio 21.44 11.72

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

The iShares Russell Mid-Cap ETF (IWR) has a Mean Return of 1.17 with a Treynor Ratio of 11.72 and a R-squared of 91.52. Its Sharpe Ratio is 0.86 while IWR’s Beta is 1.11. Furthermore, the fund has a Standard Deviation of 15.66 and a Alpha of -2.8.

XLK’s Mean Return is 0.53 points higher than that of IWR and its R-squared is 17.96 points lower. With a Standard Deviation of 15.58, XLK is slightly less volatile than IWR. The Alpha and Beta of XLK are 13.23 points higher and 0.16 points lower than IWR’s Alpha and Beta.

Performance

Annual Returns

XLK vs. IWR - Annual Returns

Year XLK IWR
2020 43.67% 16.91%
2019 49.97% 30.31%
2018 -1.56% -9.13%
2017 34.27% 18.32%
2016 14.81% 13.58%
2015 5.62% -2.57%
2014 17.75% 13.03%
2013 25.98% 34.5%
2012 15.47% 17.13%
2011 2.69% -1.67%
2010 11.6% 25.25%

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 IWR, returning 34.5% on an annual basis. The poorest year for IWR in the last ten years was 2018, with a yield of -9.13%. Most years the iShares Russell Mid-Cap ETF has given investors modest returns, such as in 2016, 2020, and 2012, when gains were 13.58%, 16.91%, and 17.13% respectively.

Portfolio Growth

XLK vs. IWR - Portfolio Growth

Fund Initial Balance Final Balance CAGR
XLK $10,000 $67,790 20.02%
IWR $10,000 $39,751 14.15%

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 IWR, the end total would have been $39,751. This equates to a $29,751 profit over 11 years and a compound annual growth rate (CAGR) of 14.15%.

XLK’s CAGR is 5.87 percentage points higher than that of IWR and as a result, would have yielded $28,039 more on a $10,000 investment. Thus, XLK outperformed IWR by 5.87% annually.


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