XLK vs. SCHB: What’s The Difference?

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

The expense ratio of XLK is 0.09 percentage points higher than SCHB’s (0.12% vs. 0.03%). XLK also has a higher exposure to the technology sector and a higher standard deviation. Overall, XLK has provided higher returns than SCHB over the past ten years.

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

Summary

XLK SCHB
Name Technology Select Sector SPDR Fund Schwab U.S. Broad Market ETF
Category Technology Large Blend
Issuer SPDR State Street Global Advisors Schwab ETFs
AUM 42.3B 21.44B
Avg. Return 20.02% 14.43%
Div. Yield 0.73% 1.39%
Expense Ratio 0.12% 0.03%

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. Broad Market ETF (SCHB) is a Large Blend fund that is issued by Schwab ETFs. It currently has 21.44B total assets under management and has yielded an average annual return of 14.43% over the past 10 years. The fund has a dividend yield of 1.39% with an expense ratio of 0.03%.

XLK’s dividend yield is 0.66% lower than that of SCHB (0.73% vs. 1.39%). Also, XLK yielded on average 5.59% more per year over the past decade (20.02% vs. 14.43%). The expense ratio of XLK is 0.09 percentage points higher than SCHB’s (0.12% vs. 0.03%).

Fund Composition

Industry Exposure

XLK vs. SCHB - Industry Exposure

XLK SCHB
Technology 87.54% 24.15%
Industrials 1.75% 9.29%
Energy 0.0% 2.78%
Communication Services 0.0% 10.52%
Utilities 0.0% 2.32%
Healthcare 0.0% 13.37%
Consumer Defensive 0.0% 5.76%
Real Estate 0.0% 3.58%
Financial Services 10.71% 13.88%
Consumer Cyclical 0.0% 11.9%
Basic Materials 0.0% 2.45%

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. Broad Market ETF (SCHB) has the most exposure to the Technology sector at 24.15%. This is followed by Financial Services and Healthcare at 13.88% and 13.37% respectively. Basic Materials (2.45%), Energy (2.78%), and Real Estate (3.58%) only make up 8.81% of the fund’s total assets.

SCHB’s mid-section with moderate exposure is comprised of Consumer Defensive, Industrials, Communication Services, Consumer Cyclical, and Healthcare stocks at 5.76%, 9.29%, 10.52%, 11.9%, and 13.37%.

XLK is 63.39% more exposed to the Technology sector than SCHB (87.54% vs 24.15%). XLK’s exposure to Financial Services and Industrials stocks is 3.17% lower and 7.54% lower respectively (10.71% vs. 13.88% and 1.75% vs. 9.29%). In total, Consumer Cyclical, Real Estate, and Consumer Defensive also make up 21.24% less of the fund’s holdings compared to SCHB (0.00% vs. 21.24%).

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%.

SCHB - Holdings

SCHB Holdings Weight
Apple Inc 4.86%
Microsoft Corp 4.61%
Amazon.com Inc 3.33%
Facebook Inc A 1.88%
Alphabet Inc A 1.66%
Alphabet Inc Class C 1.61%
Berkshire Hathaway Inc Class B 1.19%
Tesla Inc 1.18%
NVIDIA Corp 1.13%
JPMorgan Chase & Co 1.06%

SCHB’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc A, and Alphabet Inc A at 4.86%, 4.61%, 3.33%, 1.88%, and 1.66%.

Alphabet Inc Class C (1.61%), Berkshire Hathaway Inc Class B (1.19%), and Tesla Inc (1.18%) have a slightly smaller but still significant weight. NVIDIA Corp and JPMorgan Chase & Co are also represented in the SCHB’s holdings at 1.13% and 1.06%.

Risk Analysis

XLK SCHB
Mean Return 1.7 1.23
R-squared 73.56 99.33
Std. Deviation 15.58 14.12
Alpha 10.43 -0.58
Beta 0.95 1.04
Sharpe Ratio 1.27 1
Treynor Ratio 21.44 13.58

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

The Schwab U.S. Broad Market ETF (SCHB) has a Standard Deviation of 14.12 with a Sharpe Ratio of 1 and a R-squared of 99.33. Its Mean Return is 1.23 while SCHB’s Alpha is -0.58. Furthermore, the fund has a Beta of 1.04 and a Treynor Ratio of 13.58.

XLK’s Mean Return is 0.47 points higher than that of SCHB and its R-squared is 25.77 points lower. With a Standard Deviation of 15.58, XLK is slightly more volatile than SCHB. The Alpha and Beta of XLK are 11.01 points higher and 0.09 points lower than SCHB’s Alpha and Beta.

Performance

Annual Returns

XLK vs. SCHB - Annual Returns

Year XLK SCHB
2020 43.67% 20.77%
2019 49.97% 30.94%
2018 -1.56% -5.25%
2017 34.27% 21.18%
2016 14.81% 12.56%
2015 5.62% 0.45%
2014 17.75% 12.67%
2013 25.98% 33.37%
2012 15.47% 16.22%
2011 2.69% 1.4%
2010 11.6% 17.1%

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 SCHB, returning 33.37% on an annual basis. The poorest year for SCHB in the last ten years was 2018, with a yield of -5.25%. Most years the Schwab U.S. Broad Market ETF has given investors modest returns, such as in 2014, 2012, and 2010, when gains were 12.67%, 16.22%, and 17.1% respectively.

Portfolio Growth

XLK vs. SCHB - Portfolio Growth

Fund Initial Balance Final Balance CAGR
XLK $10,000 $60,744 20.02%
SCHB $10,000 $36,354 14.43%

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 SCHB, the end total would have been $36,354. This equates to a $26,354 profit over 10 years and a compound annual growth rate (CAGR) of 14.43%.

XLK’s CAGR is 5.59 percentage points higher than that of SCHB and as a result, would have yielded $24,390 more on a $10,000 investment. Thus, XLK outperformed SCHB by 5.59% annually.


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