XLK vs. MUB: What’s The Difference?

The Technology Select Sector SPDR Fund (XLK) and the iShares National Muni Bond ETF (MUB) are both among the Top 100 ETFs. XLK is a SPDR State Street Global Advisors Technology fund and MUB is a iShares Muni National Interm fund. So, what’s the difference between XLK and MUB? And which fund is better?

The expense ratio of XLK is 0.05 percentage points higher than MUB’s (0.12% vs. 0.07%). XLK also has a high exposure to the technology sector while MUB is mostly comprised of AA bonds. Overall, XLK has provided higher returns than MUB over the past ten years.

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

Summary

XLK MUB
Name Technology Select Sector SPDR Fund iShares National Muni Bond ETF
Category Technology Muni National Interm
Issuer SPDR State Street Global Advisors iShares
AUM 42.3B 22.71B
Avg. Return 20.02% 4.04%
Div. Yield 0.73% 1.96%
Expense Ratio 0.12% 0.07%

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 National Muni Bond ETF (MUB) is a Muni National Interm fund that is issued by iShares. It currently has 22.71B total assets under management and has yielded an average annual return of 4.04% over the past 10 years. The fund has a dividend yield of 1.96% with an expense ratio of 0.07%.

XLK’s dividend yield is 1.23% lower than that of MUB (0.73% vs. 1.96%). Also, XLK yielded on average 15.99% more per year over the past decade (20.02% vs. 4.04%). The expense ratio of XLK is 0.05 percentage points higher than MUB’s (0.12% vs. 0.07%).

Fund Composition

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%.

MUB - Holdings

MUB Bond Sectors Weight
AA 60.38%
AAA 18.39%
A 15.04%
BBB 6.0%
Others 0.17%
BB 0.02%
Below B 0.0%
B 0.0%
US Government 0.0%

MUB’s Top Bond Sectors are ratings of AA, AAA, A, BBB, and Others at 60.38%, 18.39%, 15.04%, 6.0%, and 0.17%. The fund is less weighted towards BB (0.02%), Below B (0.0%), and B (0.0%) rated bonds.

Risk Analysis

XLK MUB
Mean Return 1.7 0.32
R-squared 73.56 99
Std. Deviation 15.58 3.68
Alpha 10.43 -0.46
Beta 0.95 1.01
Sharpe Ratio 1.27 0.88
Treynor Ratio 21.44 3.2

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

The iShares National Muni Bond ETF (MUB) has a Mean Return of 0.32 with a Treynor Ratio of 3.2 and a Beta of 1.01. Its Sharpe Ratio is 0.88 while MUB’s Standard Deviation is 3.68. Furthermore, the fund has a Alpha of -0.46 and a R-squared of 99.

XLK’s Mean Return is 1.38 points higher than that of MUB and its R-squared is 25.44 points lower. With a Standard Deviation of 15.58, XLK is slightly more volatile than MUB. The Alpha and Beta of XLK are 10.89 points higher and 0.06 points lower than MUB’s Alpha and Beta.

Performance

Annual Returns

XLK vs. MUB - Annual Returns

Year XLK MUB
2020 43.67% 4.87%
2019 49.97% 7.28%
2018 -1.56% 0.86%
2017 34.27% 4.61%
2016 14.81% 0.06%
2015 5.62% 2.99%
2014 17.75% 8.61%
2013 25.98% -3.26%
2012 15.47% 6.14%
2011 2.69% 10.85%
2010 11.6% 1.4%

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 2011 was the strongest year for MUB, returning 10.85% on an annual basis. The poorest year for MUB in the last ten years was 2013, with a yield of -3.26%. Most years the iShares National Muni Bond ETF has given investors modest returns, such as in 2015, 2017, and 2020, when gains were 2.99%, 4.61%, and 4.87% respectively.

Portfolio Growth

XLK vs. MUB - Portfolio Growth

Fund Initial Balance Final Balance CAGR
XLK $10,000 $67,790 20.02%
MUB $10,000 $15,333 4.04%

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 MUB, the end total would have been $15,333. This equates to a $5,333 profit over 11 years and a compound annual growth rate (CAGR) of 4.04%.

XLK’s CAGR is 15.99 percentage points higher than that of MUB and as a result, would have yielded $52,457 more on a $10,000 investment. Thus, XLK outperformed MUB by 15.99% annually.


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