The Technology Select Sector SPDR Fund (XLK) and the iShares Russell Mid-Cap Value ETF (IWS) are both among the Top 100 ETFs. XLK is a SPDR State Street Global Advisors Technology fund and IWS is a iShares Mid-Cap Value fund. So, what’s the difference between XLK and IWS? And which fund is better?
The expense ratio of XLK is 0.11 percentage points lower than IWS’s (0.12% vs. 0.23%). XLK also has a higher exposure to the technology sector and a lower standard deviation. Overall, XLK has provided higher returns than IWS over the past ten years.
In this article, we’ll compare XLK vs. IWS. We’ll look at holdings and fund composition, as well as at their risk metrics and portfolio growth. Moreover, I’ll also discuss XLK’s and IWS’s performance, annual returns, and industry exposure and examine how these affect their overall returns.
Summary
| XLK | IWS | |
| Name | Technology Select Sector SPDR Fund | iShares Russell Mid-Cap Value ETF |
| Category | Technology | Mid-Cap Value |
| Issuer | SPDR State Street Global Advisors | iShares |
| AUM | 42.3B | 14.24B |
| Avg. Return | 20.02% | 12.35% |
| Div. Yield | 0.73% | 1.34% |
| Expense Ratio | 0.12% | 0.23% |
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 Value ETF (IWS) is a Mid-Cap Value fund that is issued by iShares. It currently has 14.24B total assets under management and has yielded an average annual return of 12.35% over the past 10 years. The fund has a dividend yield of 1.34% with an expense ratio of 0.23%.
XLK’s dividend yield is 0.61% lower than that of IWS (0.73% vs. 1.34%). Also, XLK yielded on average 7.68% more per year over the past decade (20.02% vs. 12.35%). The expense ratio of XLK is 0.11 percentage points lower than IWS’s (0.12% vs. 0.23%).
Fund Composition
Industry Exposure
| XLK | IWS | |
| Technology | 87.54% | 11.39% |
| Industrials | 1.75% | 14.6% |
| Energy | 0.0% | 4.71% |
| Communication Services | 0.0% | 4.08% |
| Utilities | 0.0% | 6.97% |
| Healthcare | 0.0% | 8.56% |
| Consumer Defensive | 0.0% | 4.76% |
| Real Estate | 0.0% | 11.71% |
| Financial Services | 10.71% | 15.75% |
| Consumer Cyclical | 0.0% | 12.07% |
| Basic Materials | 0.0% | 5.4% |
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 Value ETF (IWS) has the most exposure to the Financial Services sector at 15.75%. This is followed by Industrials and Consumer Cyclical at 14.6% and 12.07% respectively. Energy (4.71%), Consumer Defensive (4.76%), and Basic Materials (5.4%) only make up 14.87% of the fund’s total assets.
IWS’s mid-section with moderate exposure is comprised of Utilities, Healthcare, Technology, Real Estate, and Consumer Cyclical stocks at 6.97%, 8.56%, 11.39%, 11.71%, and 12.07%.
XLK is 76.15% more exposed to the Technology sector than IWS (87.54% vs 11.39%). XLK’s exposure to Financial Services and Industrials stocks is 5.04% lower and 12.85% lower respectively (10.71% vs. 15.75% and 1.75% vs. 14.6%). In total, Consumer Cyclical, Real Estate, and Consumer Defensive also make up 28.54% less of the fund’s holdings compared to IWS (0.00% vs. 28.54%).
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%.
| IWS Holdings | Weight |
| Twitter Inc | 0.69% |
| Marvell Technology Inc | 0.69% |
| IHS Markit Ltd | 0.62% |
| Prudential Financial Inc | 0.56% |
| Otis Worldwide Corp Ordinary Shares | 0.54% |
| International Flavors & Fragrances Inc | 0.53% |
| Xcel Energy Inc | 0.52% |
| Motorola Solutions Inc | 0.52% |
| Aptiv PLC | 0.52% |
| Aflac Inc | 0.52% |
IWS’s Top Holdings are Twitter Inc, Marvell Technology Inc, IHS Markit Ltd, Prudential Financial Inc, and Otis Worldwide Corp Ordinary Shares at 0.69%, 0.69%, 0.62%, 0.56%, and 0.54%.
International Flavors & Fragrances Inc (0.53%), Xcel Energy Inc (0.52%), and Motorola Solutions Inc (0.52%) have a slightly smaller but still significant weight. Aptiv PLC and Aflac Inc are also represented in the IWS’s holdings at 0.52% and 0.52%.
Risk Analysis
| XLK | IWS | |
| Mean Return | 1.7 | 1.06 |
| R-squared | 73.56 | 87.04 |
| Std. Deviation | 15.58 | 16.03 |
| Alpha | 10.43 | -4.11 |
| Beta | 0.95 | 1.1 |
| Sharpe Ratio | 1.27 | 0.75 |
| Treynor Ratio | 21.44 | 10.3 |
The Technology Select Sector SPDR Fund (XLK) has a Mean Return of 1.7 with a Standard Deviation of 15.58 and a Sharpe Ratio of 1.27. Its Beta is 0.95 while XLK’s R-squared is 73.56. Furthermore, the fund has a Treynor Ratio of 21.44 and a Alpha of 10.43.
The iShares Russell Mid-Cap Value ETF (IWS) has a Mean Return of 1.06 with a Treynor Ratio of 10.3 and a Sharpe Ratio of 0.75. Its Alpha is -4.11 while IWS’s Standard Deviation is 16.03. Furthermore, the fund has a R-squared of 87.04 and a Beta of 1.1.
XLK’s Mean Return is 0.64 points higher than that of IWS and its R-squared is 13.48 points lower. With a Standard Deviation of 15.58, XLK is slightly less volatile than IWS. The Alpha and Beta of XLK are 14.54 points higher and 0.15 points lower than IWS’s Alpha and Beta.
Performance
Annual Returns
| Year | XLK | IWS |
| 2020 | 43.67% | 4.76% |
| 2019 | 49.97% | 26.78% |
| 2018 | -1.56% | -12.36% |
| 2017 | 34.27% | 13.1% |
| 2016 | 14.81% | 19.69% |
| 2015 | 5.62% | -4.93% |
| 2014 | 17.75% | 14.49% |
| 2013 | 25.98% | 33.11% |
| 2012 | 15.47% | 18.27% |
| 2011 | 2.69% | -1.55% |
| 2010 | 11.6% | 24.46% |
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 IWS, returning 33.11% on an annual basis. The poorest year for IWS in the last ten years was 2018, with a yield of -12.36%. Most years the iShares Russell Mid-Cap Value ETF has given investors modest returns, such as in 2017, 2014, and 2012, when gains were 13.1%, 14.49%, and 18.27% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| XLK | $10,000 | $67,790 | 20.02% |
| IWS | $10,000 | $33,083 | 12.35% |
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 IWS, the end total would have been $33,083. This equates to a $23,083 profit over 11 years and a compound annual growth rate (CAGR) of 12.35%.
XLK’s CAGR is 7.68 percentage points higher than that of IWS and as a result, would have yielded $34,707 more on a $10,000 investment. Thus, XLK outperformed IWS by 7.68% annually.
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