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XLK vs. SCHA: What’s The Difference?

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

The expense ratio of XLK is 0.08 percentage points higher than SCHA’s (0.12% vs. 0.04%). XLK also has a higher exposure to the technology sector and a lower standard deviation. Overall, XLK has provided higher returns than SCHA over the past ten years.

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

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Summary

XLKSCHA
NameTechnology Select Sector SPDR FundSchwab U.S. Small-Cap ETF
CategoryTechnologySmall Blend
IssuerSPDR State Street Global AdvisorsSchwab ETFs
AUM42.3B16.51B
Avg. Return20.02%12.62%
Div. Yield0.73%0.98%
Expense Ratio0.12%0.04%

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 Schwab U.S. Small-Cap ETF (SCHA) is a Small Blend fund that is issued by Schwab ETFs. It currently has 16.51B total assets under management and has yielded an average annual return of 12.62% over the past 10 years. The fund has a dividend yield of 0.98% with an expense ratio of 0.04%.

XLK’s dividend yield is 0.25% lower than that of SCHA (0.73% vs. 0.98%). Also, XLK yielded on average 7.40% more per year over the past decade (20.02% vs. 12.62%). The expense ratio of XLK is 0.08 percentage points higher than SCHA’s (0.12% vs. 0.04%).

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Fund Composition

Industry Exposure

XLK vs. SCHA - Industry Exposure

XLKSCHA
Technology87.54%14.91%
Industrials1.75%15.37%
Energy0.0%3.35%
Communication Services0.0%3.5%
Utilities0.0%1.83%
Healthcare0.0%16.5%
Consumer Defensive0.0%3.75%
Real Estate0.0%7.83%
Financial Services10.71%14.49%
Consumer Cyclical0.0%14.48%
Basic Materials0.0%3.98%

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 Schwab U.S. Small-Cap ETF (SCHA) has the most exposure to the Healthcare sector at 16.5%. This is followed by Industrials and Technology at 15.37% and 14.91% respectively. Energy (3.35%), Communication Services (3.5%), and Consumer Defensive (3.75%) only make up 10.60% of the fund’s total assets.

SCHA’s mid-section with moderate exposure is comprised of Basic Materials, Real Estate, Consumer Cyclical, Financial Services, and Technology stocks at 3.98%, 7.83%, 14.48%, 14.49%, and 14.91%.

XLK is 72.63% more exposed to the Technology sector than SCHA (87.54% vs 14.91%). XLK’s exposure to Financial Services and Industrials stocks is 3.78% lower and 13.62% lower respectively (10.71% vs. 14.49% and 1.75% vs. 15.37%). In total, Consumer Cyclical, Real Estate, and Consumer Defensive also make up 26.06% less of the fund’s holdings compared to SCHA (0.00% vs. 26.06%).

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%.

SCHA - Holdings

SCHA HoldingsWeight
AMC Entertainment Holdings Inc Class A0.67%
Caesars Entertainment Inc0.51%
Cloudflare Inc0.48%
NovoCure Ltd0.45%
Plug Power Inc0.41%
10x Genomics Inc Ordinary Shares – Class A0.34%
GameStop Corp Class A0.28%
RH0.27%
Penn National Gaming Inc0.27%
Axon Enterprise Inc0.27%

SCHA’s Top Holdings are AMC Entertainment Holdings Inc Class A, Caesars Entertainment Inc, Cloudflare Inc, NovoCure Ltd, and Plug Power Inc at 0.67%, 0.51%, 0.48%, 0.45%, and 0.41%.

10x Genomics Inc Ordinary Shares – Class A (0.34%), GameStop Corp Class A (0.28%), and RH (0.27%) have a slightly smaller but still significant weight. Penn National Gaming Inc and Axon Enterprise Inc are also represented in the SCHA’s holdings at 0.27% and 0.27%.

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Risk Analysis

XLKSCHA
Mean Return1.71.14
R-squared73.5682.26
Std. Deviation15.5818.68
Alpha10.43-4.65
Beta0.951.25
Sharpe Ratio1.270.7
Treynor Ratio21.449.62

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

The Schwab U.S. Small-Cap ETF (SCHA) has a Standard Deviation of 18.68 with a Sharpe Ratio of 0.7 and a Alpha of -4.65. Its Mean Return is 1.14 while SCHA’s Treynor Ratio is 9.62. Furthermore, the fund has a Beta of 1.25 and a R-squared of 82.26.

XLK’s Mean Return is 0.56 points higher than that of SCHA and its R-squared is 8.70 points lower. With a Standard Deviation of 15.58, XLK is slightly less volatile than SCHA. The Alpha and Beta of XLK are 15.08 points higher and 0.30 points lower than SCHA’s Alpha and Beta.

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Performance

Annual Returns

XLK vs. SCHA - Annual Returns

YearXLKSCHA
202043.67%19.35%
201949.97%26.54%
2018-1.56%-11.75%
201734.27%15.04%
201614.81%19.88%
20155.62%-4.24%
201417.75%6.53%
201325.98%39.59%
201215.47%18.24%
20112.69%-2.95%
201011.6%28.31%

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 SCHA, returning 39.59% on an annual basis. The poorest year for SCHA in the last ten years was 2018, with a yield of -11.75%. Most years the Schwab U.S. Small-Cap ETF has given investors modest returns, such as in 2017, 2012, and 2020, when gains were 15.04%, 18.24%, and 19.35% respectively.

Portfolio Growth

XLK vs. SCHA - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
XLK$10,000$60,74420.02%
SCHA$10,000$30,03512.62%

A $10,000 investment in XLK would have resulted in a final balance of $60,744. This is a profit of $50,744 over 10 years and amounts to a compound annual growth rate (CAGR) of 20.02%.

With a $10,000 investment in SCHA, the end total would have been $30,035. This equates to a $20,035 profit over 10 years and a compound annual growth rate (CAGR) of 12.62%.

XLK’s CAGR is 7.40 percentage points higher than that of SCHA and as a result, would have yielded $30,709 more on a $10,000 investment. Thus, XLK outperformed SCHA by 7.40% annually.


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