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XLK vs. TIP: What’s The Difference?

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

The expense ratio of XLK is 0.07 percentage points lower than TIP’s (0.12% vs. 0.19%). XLK also has a high exposure to the technology sector while TIP is mostly comprised of AAA bonds. Overall, XLK has provided higher returns than TIP over the past ten years.

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


NameTechnology Select Sector SPDR FundiShares TIPS Bond ETF
CategoryTechnologyInflation-Protected Bond
IssuerSPDR State Street Global AdvisorsiShares
Avg. Return20.02%4.07%
Div. Yield0.73%1.87%
Expense Ratio0.12%0.19%

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 TIPS Bond ETF (TIP) is a Inflation-Protected Bond fund that is issued by iShares. It currently has 28.3B total assets under management and has yielded an average annual return of 4.07% over the past 10 years. The fund has a dividend yield of 1.87% with an expense ratio of 0.19%.

XLK’s dividend yield is 1.14% lower than that of TIP (0.73% vs. 1.87%). Also, XLK yielded on average 15.95% more per year over the past decade (20.02% vs. 4.07%). The expense ratio of XLK is 0.07 percentage points lower than TIP’s (0.12% vs. 0.19%).

Fund Composition


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% 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 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%.

TIP - Holdings

TIP Bond SectorsWeight
Below B0.0%
US Government0.0%

TIP’s Top Bond Sectors are ratings of AAA, Others, Below B, B, and BB at 99.31%, 0.69%, 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.

Risk Analysis

Mean Return1.70.28
Std. Deviation15.584.33
Sharpe Ratio1.270.62
Treynor Ratio21.442.24

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

The iShares TIPS Bond ETF (TIP) has a R-squared of 66.57 with a Sharpe Ratio of 0.62 and a Mean Return of 0.28. Its Standard Deviation is 4.33 while TIP’s Beta is 1.18. Furthermore, the fund has a Treynor Ratio of 2.24 and a Alpha of -0.58.

XLK’s Mean Return is 1.42 points higher than that of TIP and its R-squared is 6.99 points higher. With a Standard Deviation of 15.58, XLK is slightly more volatile than TIP. The Alpha and Beta of XLK are 11.01 points higher and 0.23 points lower than TIP’s Alpha and Beta.


Annual Returns

XLK vs. TIP - Annual Returns


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 TIP, returning 13.4% on an annual basis. The poorest year for TIP in the last ten years was 2013, with a yield of -8.65%. Most years the iShares TIPS Bond ETF has given investors modest returns, such as in 2014, 2016, and 2010, when gains were 3.49%, 4.56%, and 6.1% respectively.

Portfolio Growth

XLK vs. TIP - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR

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 TIP, the end total would have been $15,229. This equates to a $5,229 profit over 11 years and a compound annual growth rate (CAGR) of 4.07%.

XLK’s CAGR is 15.95 percentage points higher than that of TIP and as a result, would have yielded $52,561 more on a $10,000 investment. Thus, XLK outperformed TIP by 15.95% annually.

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