The Technology Select Sector SPDR Fund (XLK) and the Schwab U.S. TIPS ETF (SCHP) are both among the Top 100 ETFs. XLK is a SPDR State Street Global Advisors Technology fund and SCHP is a Schwab ETFs Inflation-Protected Bond fund. So, what’s the difference between XLK and SCHP? And which fund is better?
The expense ratio of XLK is 0.07 percentage points higher than SCHP’s (0.12% vs. 0.05%). XLK also has a high exposure to the technology sector while SCHP is mostly comprised of AAA bonds. Overall, XLK has provided higher returns than SCHP over the past ten years.
In this article, we’ll compare XLK vs. SCHP. We’ll look at portfolio growth and fund composition, as well as at their holdings and risk metrics. Moreover, I’ll also discuss XLK’s and SCHP’s annual returns, performance, and industry exposure and examine how these affect their overall returns.
|Name||Technology Select Sector SPDR Fund||Schwab U.S. TIPS ETF|
|Issuer||SPDR State Street Global Advisors||Schwab ETFs|
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. TIPS ETF (SCHP) is a Inflation-Protected Bond fund that is issued by Schwab ETFs. It currently has 18.41B total assets under management and has yielded an average annual return of 3.92% over the past 10 years. The fund has a dividend yield of 1.97% with an expense ratio of 0.05%.
XLK’s dividend yield is 1.24% lower than that of SCHP (0.73% vs. 1.97%). Also, XLK yielded on average 16.11% more per year over the past decade (20.02% vs. 3.92%). The expense ratio of XLK is 0.07 percentage points higher than SCHP’s (0.12% vs. 0.05%).
|Visa Inc Class A||3.95%|
|PayPal Holdings Inc||3.42%|
|Mastercard Inc A||3.19%|
|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%.
|SCHP Bond Sectors||Weight|
SCHP’s Top Bond Sectors are ratings of AAA, Others, Below B, B, and BB at 100.0%, 0.0%, 0.0%, 0.0%, and 0.0%. The fund is less weighted towards BBB (0.0%), A (0.0%), and AA (0.0%) rated bonds.
The Technology Select Sector SPDR Fund (XLK) has a Sharpe Ratio of 1.27 with a Beta of 0.95 and a Standard Deviation of 15.58. Its Alpha is 10.43 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. TIPS ETF (SCHP) has a Beta of 1.17 with a Treynor Ratio of 2.31 and a R-squared of 66.16. Its Mean Return is 0.28 while SCHP’s Alpha is -0.5. Furthermore, the fund has a Sharpe Ratio of 0.64 and a Standard Deviation of 4.32.
XLK’s Mean Return is 1.42 points higher than that of SCHP and its R-squared is 7.40 points higher. With a Standard Deviation of 15.58, XLK is slightly more volatile than SCHP. The Alpha and Beta of XLK are 10.93 points higher and 0.22 points lower than SCHP’s Alpha and Beta.
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 SCHP, returning 13.38% on an annual basis. The poorest year for SCHP in the last ten years was 2013, with a yield of -8.66%. Most years the Schwab U.S. TIPS ETF has given investors modest returns, such as in 2017, 2014, and 2016, when gains were 2.95%, 3.56%, and 4.6% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
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 SCHP, the end total would have been $14,418. This equates to a $4,418 profit over 10 years and a compound annual growth rate (CAGR) of 3.92%.
XLK’s CAGR is 16.11 percentage points higher than that of SCHP and as a result, would have yielded $46,326 more on a $10,000 investment. Thus, XLK outperformed SCHP by 16.11% annually.
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