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XLK vs. SCHD: What’s The Difference?

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

The expense ratio of XLK is 0.06 percentage points higher than SCHD’s (0.12% vs. 0.06%). XLK also has a higher exposure to the technology sector and a higher standard deviation. Overall, XLK has provided higher returns than SCHD over the past ten years.

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

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Summary

XLKSCHD
NameTechnology Select Sector SPDR FundSchwab U.S. Dividend Equity ETF
CategoryTechnologyLarge Value
IssuerSPDR State Street Global AdvisorsSchwab ETFs
AUM42.3B26B
Avg. Return20.02%14.80%
Div. Yield0.73%2.89%
Expense Ratio0.12%0.06%

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. Dividend Equity ETF (SCHD) is a Large Value fund that is issued by Schwab ETFs. It currently has 26B total assets under management and has yielded an average annual return of 14.80% over the past 10 years. The fund has a dividend yield of 2.89% with an expense ratio of 0.06%.

XLK’s dividend yield is 2.16% lower than that of SCHD (0.73% vs. 2.89%). Also, XLK yielded on average 5.22% more per year over the past decade (20.02% vs. 14.80%). The expense ratio of XLK is 0.06 percentage points higher than SCHD’s (0.12% vs. 0.06%).

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Fund Composition

Industry Exposure

XLK vs. SCHD - Industry Exposure

XLKSCHD
Technology87.54%16.26%
Industrials1.75%18.05%
Energy0.0%1.87%
Communication Services0.0%4.96%
Utilities0.0%0.0%
Healthcare0.0%12.64%
Consumer Defensive0.0%14.04%
Real Estate0.0%0.0%
Financial Services10.71%21.69%
Consumer Cyclical0.0%8.36%
Basic Materials0.0%2.13%

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. Dividend Equity ETF (SCHD) has the most exposure to the Financial Services sector at 21.69%. This is followed by Industrials and Technology at 18.05% and 16.26% respectively. Utilities (0.0%), Energy (1.87%), and Basic Materials (2.13%) only make up 4.00% of the fund’s total assets.

SCHD’s mid-section with moderate exposure is comprised of Communication Services, Consumer Cyclical, Healthcare, Consumer Defensive, and Technology stocks at 4.96%, 8.36%, 12.64%, 14.04%, and 16.26%.

XLK is 71.28% more exposed to the Technology sector than SCHD (87.54% vs 16.26%). XLK’s exposure to Financial Services and Industrials stocks is 10.98% lower and 16.30% lower respectively (10.71% vs. 21.69% and 1.75% vs. 18.05%). In total, Consumer Cyclical, Real Estate, and Consumer Defensive also make up 22.40% less of the fund’s holdings compared to SCHD (0.00% vs. 22.40%).

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%.

SCHD - Holdings

SCHD HoldingsWeight
Merck & Co Inc4.24%
The Home Depot Inc4.19%
Texas Instruments Inc4.16%
Broadcom Inc4.15%
Amgen Inc4.11%
PepsiCo Inc4.09%
BlackRock Inc4.05%
Pfizer Inc3.97%
Verizon Communications Inc3.96%
Cisco Systems Inc3.96%

SCHD’s Top Holdings are Merck & Co Inc, The Home Depot Inc, Texas Instruments Inc, Broadcom Inc, and Amgen Inc at 4.24%, 4.19%, 4.16%, 4.15%, and 4.11%.

PepsiCo Inc (4.09%), BlackRock Inc (4.05%), and Pfizer Inc (3.97%) have a slightly smaller but still significant weight. Verizon Communications Inc and Cisco Systems Inc are also represented in the SCHD’s holdings at 3.96% and 3.96%.

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Risk Analysis

XLKSCHD
Mean Return1.70
R-squared73.560
Std. Deviation15.580
Alpha10.430
Beta0.950
Sharpe Ratio1.270
Treynor Ratio21.440

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

The Schwab U.S. Dividend Equity ETF (SCHD) has a Alpha of 0 with a Treynor Ratio of 0 and a Mean Return of 0. Its Beta is 0 while SCHD’s Standard Deviation is 0. Furthermore, the fund has a Sharpe Ratio of 0 and a R-squared of 0.

XLK’s Mean Return is 1.70 points higher than that of SCHD and its R-squared is 73.56 points higher. With a Standard Deviation of 15.58, XLK is slightly more volatile than SCHD. The Alpha and Beta of XLK are 10.43 points higher and 0.95 points higher than SCHD’s Alpha and Beta.

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Performance

Annual Returns

XLK vs. SCHD - Annual Returns

YearXLKSCHD
202043.67%15.11%
201949.97%27.28%
2018-1.56%-5.46%
201734.27%20.88%
201614.81%16.25%
20155.62%-0.21%
201417.75%11.66%
201325.98%32.9%
201215.47%11.4%
20112.69%0.0%
201011.6%0.0%

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 SCHD, returning 32.9% on an annual basis. The poorest year for SCHD in the last ten years was 2018, with a yield of -5.46%. Most years the Schwab U.S. Dividend Equity ETF has given investors modest returns, such as in 2012, 2014, and 2020, when gains were 11.4%, 11.66%, and 15.11% respectively.

Portfolio Growth

XLK vs. SCHD - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
XLK$10,000$51,22820.02%
SCHD$10,000$28,82314.80%

A $10,000 investment in XLK would have resulted in a final balance of $51,228. This is a profit of $41,228 over 8 years and amounts to a compound annual growth rate (CAGR) of 20.02%.

With a $10,000 investment in SCHD, the end total would have been $28,823. This equates to a $18,823 profit over 8 years and a compound annual growth rate (CAGR) of 14.80%.

XLK’s CAGR is 5.22 percentage points higher than that of SCHD and as a result, would have yielded $22,405 more on a $10,000 investment. Thus, XLK outperformed SCHD by 5.22% annually.


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