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XLK vs. MDY: What’s The Difference?

The Technology Select Sector SPDR Fund (XLK) and the SPDR S&P MIDCAP 400 ETF Trust (MDY) are both among the Top 100 ETFs. XLK is a SPDR State Street Global Advisors Technology fund and MDY is a SPDR State Street Global Advisors Mid-Cap Blend fund. So, what’s the difference between XLK and MDY? And which fund is better?

The expense ratio of XLK is 0.11 percentage points lower than MDY’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 MDY over the past ten years.

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

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Summary

XLKMDY
NameTechnology Select Sector SPDR FundSPDR S&P MIDCAP 400 ETF Trust
CategoryTechnologyMid-Cap Blend
IssuerSPDR State Street Global AdvisorsSPDR State Street Global Advisors
AUM42.3B21.31B
Avg. Return20.02%13.29%
Div. Yield0.73%0.94%
Expense Ratio0.12%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 SPDR S&P MIDCAP 400 ETF Trust (MDY) is a Mid-Cap Blend fund that is issued by SPDR State Street Global Advisors. It currently has 21.31B total assets under management and has yielded an average annual return of 13.29% over the past 10 years. The fund has a dividend yield of 0.94% with an expense ratio of 0.23%.

XLK’s dividend yield is 0.21% lower than that of MDY (0.73% vs. 0.94%). Also, XLK yielded on average 6.74% more per year over the past decade (20.02% vs. 13.29%). The expense ratio of XLK is 0.11 percentage points lower than MDY’s (0.12% vs. 0.23%).

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Fund Composition

Industry Exposure

XLK vs. MDY - Industry Exposure

XLKMDY
Technology87.54%14.74%
Industrials1.75%17.88%
Energy0.0%2.52%
Communication Services0.0%1.63%
Utilities0.0%2.84%
Healthcare0.0%11.17%
Consumer Defensive0.0%4.2%
Real Estate0.0%9.66%
Financial Services10.71%15.2%
Consumer Cyclical0.0%14.89%
Basic Materials0.0%5.27%

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 SPDR S&P MIDCAP 400 ETF Trust (MDY) has the most exposure to the Industrials sector at 17.88%. This is followed by Financial Services and Consumer Cyclical at 15.2% and 14.89% respectively. Energy (2.52%), Utilities (2.84%), and Consumer Defensive (4.2%) only make up 9.56% of the fund’s total assets.

MDY’s mid-section with moderate exposure is comprised of Basic Materials, Real Estate, Healthcare, Technology, and Consumer Cyclical stocks at 5.27%, 9.66%, 11.17%, 14.74%, and 14.89%.

XLK is 72.80% more exposed to the Technology sector than MDY (87.54% vs 14.74%). XLK’s exposure to Financial Services and Industrials stocks is 4.49% lower and 16.13% lower respectively (10.71% vs. 15.2% and 1.75% vs. 17.88%). In total, Consumer Cyclical, Real Estate, and Consumer Defensive also make up 28.75% less of the fund’s holdings compared to MDY (0.00% vs. 28.75%).

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%.

MDY - Holdings

MDY HoldingsWeight
Bio-Techne Corp0.75%
Molina Healthcare Inc0.63%
Cognex Corp0.63%
Fair Isaac Corp0.62%
XPO Logistics Inc0.61%
SolarEdge Technologies Inc0.61%
Signature Bank0.6%
Graco Inc0.55%
Camden Property Trust0.55%
FactSet Research Systems Inc0.54%

MDY’s Top Holdings are Bio-Techne Corp, Molina Healthcare Inc, Cognex Corp, Fair Isaac Corp, and XPO Logistics Inc at 0.75%, 0.63%, 0.63%, 0.62%, and 0.61%.

SolarEdge Technologies Inc (0.61%), Signature Bank (0.6%), and Graco Inc (0.55%) have a slightly smaller but still significant weight. Camden Property Trust and FactSet Research Systems Inc are also represented in the MDY’s holdings at 0.55% and 0.54%.

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Risk Analysis

XLKMDY
Mean Return1.71.08
R-squared73.5686.66
Std. Deviation15.5816.83
Alpha10.43-4.1
Beta0.951.15
Sharpe Ratio1.270.73
Treynor Ratio21.449.97

The Technology Select Sector SPDR Fund (XLK) has a Treynor Ratio of 21.44 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 Alpha of 10.43 and a Mean Return of 1.7.

The SPDR S&P MIDCAP 400 ETF Trust (MDY) has a Mean Return of 1.08 with a Standard Deviation of 16.83 and a R-squared of 86.66. Its Sharpe Ratio is 0.73 while MDY’s Treynor Ratio is 9.97. Furthermore, the fund has a Alpha of -4.1 and a Beta of 1.15.

XLK’s Mean Return is 0.62 points higher than that of MDY and its R-squared is 13.10 points lower. With a Standard Deviation of 15.58, XLK is slightly less volatile than MDY. The Alpha and Beta of XLK are 14.53 points higher and 0.20 points lower than MDY’s Alpha and Beta.

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Performance

Annual Returns

XLK vs. MDY - Annual Returns

YearXLKMDY
202043.67%13.51%
201949.97%25.86%
2018-1.56%-11.28%
201734.27%15.89%
201614.81%20.33%
20155.62%-2.4%
201417.75%9.42%
201325.98%33.08%
201215.47%17.58%
20112.69%-1.99%
201011.6%26.17%

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 MDY, returning 33.08% on an annual basis. The poorest year for MDY in the last ten years was 2018, with a yield of -11.28%. Most years the SPDR S&P MIDCAP 400 ETF Trust has given investors modest returns, such as in 2020, 2017, and 2012, when gains were 13.51%, 15.89%, and 17.58% respectively.

Portfolio Growth

XLK vs. MDY - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
XLK$10,000$67,79020.02%
MDY$10,000$36,52413.29%

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 MDY, the end total would have been $36,524. This equates to a $26,524 profit over 11 years and a compound annual growth rate (CAGR) of 13.29%.

XLK’s CAGR is 6.74 percentage points higher than that of MDY and as a result, would have yielded $31,266 more on a $10,000 investment. Thus, XLK outperformed MDY by 6.74% annually.


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