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.

Summary

XLK MDY
Name Technology Select Sector SPDR Fund SPDR S&P MIDCAP 400 ETF Trust
Category Technology Mid-Cap Blend
Issuer SPDR State Street Global Advisors SPDR State Street Global Advisors
AUM 42.3B 21.31B
Avg. Return 20.02% 13.29%
Div. Yield 0.73% 0.94%
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 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%).

Fund Composition

Industry Exposure

XLK vs. MDY - Industry Exposure

XLK MDY
Technology 87.54% 14.74%
Industrials 1.75% 17.88%
Energy 0.0% 2.52%
Communication Services 0.0% 1.63%
Utilities 0.0% 2.84%
Healthcare 0.0% 11.17%
Consumer Defensive 0.0% 4.2%
Real Estate 0.0% 9.66%
Financial Services 10.71% 15.2%
Consumer Cyclical 0.0% 14.89%
Basic Materials 0.0% 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 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%.

MDY - Holdings

MDY Holdings Weight
Bio-Techne Corp 0.75%
Molina Healthcare Inc 0.63%
Cognex Corp 0.63%
Fair Isaac Corp 0.62%
XPO Logistics Inc 0.61%
SolarEdge Technologies Inc 0.61%
Signature Bank 0.6%
Graco Inc 0.55%
Camden Property Trust 0.55%
FactSet Research Systems Inc 0.54%

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%.

Risk Analysis

XLK MDY
Mean Return 1.7 1.08
R-squared 73.56 86.66
Std. Deviation 15.58 16.83
Alpha 10.43 -4.1
Beta 0.95 1.15
Sharpe Ratio 1.27 0.73
Treynor Ratio 21.44 9.97

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.

Performance

Annual Returns

XLK vs. MDY - Annual Returns

Year XLK MDY
2020 43.67% 13.51%
2019 49.97% 25.86%
2018 -1.56% -11.28%
2017 34.27% 15.89%
2016 14.81% 20.33%
2015 5.62% -2.4%
2014 17.75% 9.42%
2013 25.98% 33.08%
2012 15.47% 17.58%
2011 2.69% -1.99%
2010 11.6% 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

Fund Initial Balance Final Balance CAGR
XLK $10,000 $67,790 20.02%
MDY $10,000 $36,524 13.29%

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.


Current recommendations:

Over the past years, I have discovered several tools and products that have helped me tremendously on my path to financial freedom:

P.S.: The links below are affiliate links, which means I receive a small commission at no extra cost to you when you sign up for one of the services. Thank you for your support!

1) Take a look at M1 Finance, my favorite broker. I love how easy it is to invest and maintain my portfolio with them. I can set up automatic transfers, rebalance my portfolio with one click and even borrow up to 35% of my assets at super low interest rates!

2) Fundrise is by far the best way I've found to invest in Real Estate. You can diversify your portfolio by investing in their eREITs or even allocate capital to individual properties (without the hassle of managing tenants!).

3) If you are interested in crypto, check out Gemini. I've started allocating a small amount of assets to the growing crypto space and Gemini has just been a breeze to use. Once you register, make sure to also open an Active Trader account to buy crypto at the lowest fees on the market (just 0.03%!).

To see all of my most up-to-date recommendations, check out the Recommended Tools section.

Leave a Reply