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XLK vs. TQQQ: What’s The Difference?

The Technology Select Sector SPDR Fund (XLK) and the ProShares UltraPro QQQ (TQQQ) are both among the Top 100 ETFs. XLK is a SPDR State Street Global Advisors Technology fund and TQQQ is a ProShares Trading–Leveraged Equity fund. So, what’s the difference between XLK and TQQQ? And which fund is better?

The expense ratio of XLK is 0.83 percentage points lower than TQQQ’s (0.12% vs. 0.95%). XLK also has a higher exposure to the technology sector and a lower standard deviation. Overall, XLK has provided lower returns than TQQQ over the past ten years.

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

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Summary

XLKTQQQ
NameTechnology Select Sector SPDR FundProShares UltraPro QQQ
CategoryTechnologyTrading–Leveraged Equity
IssuerSPDR State Street Global AdvisorsProShares
AUM42.3B12.41B
Avg. Return20.02%61.22%
Div. Yield0.73%0.0%
Expense Ratio0.12%0.95%

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 ProShares UltraPro QQQ (TQQQ) is a Trading–Leveraged Equity fund that is issued by ProShares. It currently has 12.41B total assets under management and has yielded an average annual return of 61.22% over the past 10 years. The fund has a dividend yield of 0.0% with an expense ratio of 0.95%.

XLK’s dividend yield is 0.73% higher than that of TQQQ (0.73% vs. 0.0%). Also, XLK yielded on average 41.20% less per year over the past decade (20.02% vs. 61.22%). The expense ratio of XLK is 0.83 percentage points lower than TQQQ’s (0.12% vs. 0.95%).

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Fund Composition

Industry Exposure

XLK vs. TQQQ - Industry Exposure

XLKTQQQ
Technology87.54%0.0%
Industrials1.75%0.0%
Energy0.0%0.0%
Communication Services0.0%0.0%
Utilities0.0%0.0%
Healthcare0.0%0.0%
Consumer Defensive0.0%0.0%
Real Estate0.0%0.0%
Financial Services10.71%0.0%
Consumer Cyclical0.0%0.0%
Basic Materials0.0%0.0%

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 ProShares UltraPro QQQ (TQQQ) has the most exposure to the Technology sector at 0.0%. This is followed by Industrials and Energy at 0.0% and 0.0% respectively. Consumer Cyclical (0.0%), Financial Services (0.0%), and Real Estate (0.0%) only make up 0.00% of the fund’s total assets.

TQQQ’s mid-section with moderate exposure is comprised of Consumer Defensive, Healthcare, Utilities, Communication Services, and Energy stocks at 0.0%, 0.0%, 0.0%, 0.0%, and 0.0%.

XLK is 87.54% more exposed to the Technology sector than TQQQ (87.54% vs 0.0%). XLK’s exposure to Financial Services and Industrials stocks is 10.71% higher and 1.75% higher respectively (10.71% vs. 0.0% and 1.75% vs. 0.0%). In total, Consumer Cyclical, Real Estate, and Consumer Defensive also make up 0.00% less of the fund’s holdings compared to TQQQ (0.00% vs. 0.00%).

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%.

TQQQ - Holdings

TQQQ HoldingsWeight
Nasdaq 100 Index Swap Goldman Sachs International45.11%
Nasdaq 100 Index Swap Societe Generale44.73%
Nasdaq 100 Index Swap Bnp Paribas38.05%
Nasdaq 100 Index Swap Bank Of America Na31.53%
Nasdaq 100 Index Swap Citibank Na31.49%
Nasdaq 100 Index Swap Jp Morgan Securities26.2%
Apple Inc7.49%
Microsoft Corp6.69%
Nasdaq 100 Index Swap Credit Suisse International5.9%
Amazon.com Inc5.68%

TQQQ’s Top Holdings are Nasdaq 100 Index Swap Goldman Sachs International, Nasdaq 100 Index Swap Societe Generale, Nasdaq 100 Index Swap Bnp Paribas, Nasdaq 100 Index Swap Bank Of America Na, and Nasdaq 100 Index Swap Citibank Na at 45.11%, 44.73%, 38.05%, 31.53%, and 31.49%.

Nasdaq 100 Index Swap Jp Morgan Securities (26.2%), Apple Inc (7.49%), and Microsoft Corp (6.69%) have a slightly smaller but still significant weight. Nasdaq 100 Index Swap Credit Suisse International and Amazon.com Inc are also represented in the TQQQ’s holdings at 5.9% and 5.68%.

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Risk Analysis

XLKTQQQ
Mean Return1.74.65
R-squared73.5683.64
Std. Deviation15.5850.08
Alpha10.437.29
Beta0.953.37
Sharpe Ratio1.271.1
Treynor Ratio21.4415.65

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

The ProShares UltraPro QQQ (TQQQ) has a Mean Return of 4.65 with a R-squared of 83.64 and a Alpha of 7.29. Its Standard Deviation is 50.08 while TQQQ’s Treynor Ratio is 15.65. Furthermore, the fund has a Beta of 3.37 and a Sharpe Ratio of 1.1.

XLK’s Mean Return is 2.95 points lower than that of TQQQ and its R-squared is 10.08 points lower. With a Standard Deviation of 15.58, XLK is slightly less volatile than TQQQ. The Alpha and Beta of XLK are 3.14 points higher and 2.42 points lower than TQQQ’s Alpha and Beta.

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Performance

Annual Returns

XLK vs. TQQQ - Annual Returns

YearXLKTQQQ
202043.67%109.85%
201949.97%133.93%
2018-1.56%-19.65%
201734.27%118.65%
201614.81%11.04%
20155.62%17.41%
201417.75%56.82%
201325.98%139.98%
201215.47%51.95%
20112.69%-7.77%
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 TQQQ, returning 139.98% on an annual basis. The poorest year for TQQQ in the last ten years was 2018, with a yield of -19.65%. Most years the ProShares UltraPro QQQ has given investors modest returns, such as in 2015, 2012, and 2014, when gains were 17.41%, 51.95%, and 56.82% respectively.

Portfolio Growth

XLK vs. TQQQ - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
XLK$10,000$60,74420.02%
TQQQ$10,000$593,01261.22%

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 TQQQ, the end total would have been $593,012. This equates to a $583,012 profit over 10 years and a compound annual growth rate (CAGR) of 61.22%.

XLK’s CAGR is 41.20 percentage points lower than that of TQQQ and as a result, would have yielded $532,268 less on a $10,000 investment. Thus, XLK performed worse than TQQQ by 41.20% annually.


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