XLK vs. USMV: What’s The Difference?

The Technology Select Sector SPDR Fund (XLK) and the iShares MSCI USA Min Vol Factor ETF (USMV) are both among the Top 100 ETFs. XLK is a SPDR State Street Global Advisors Technology fund and USMV is a iShares Large Blend fund. So, what’s the difference between XLK and USMV? And which fund is better?

The expense ratio of XLK is 0.03 percentage points lower than USMV’s (0.12% vs. 0.15%). XLK also has a higher exposure to the technology sector and a higher standard deviation. Overall, XLK has provided higher returns than USMV over the past ten years.

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

Summary

XLK USMV
Name Technology Select Sector SPDR Fund iShares MSCI USA Min Vol Factor ETF
Category Technology Large Blend
Issuer SPDR State Street Global Advisors iShares
AUM 42.3B 27.6B
Avg. Return 20.02% 13.89%
Div. Yield 0.73% 1.5%
Expense Ratio 0.12% 0.15%

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 MSCI USA Min Vol Factor ETF (USMV) is a Large Blend fund that is issued by iShares. It currently has 27.6B total assets under management and has yielded an average annual return of 13.89% over the past 10 years. The fund has a dividend yield of 1.5% with an expense ratio of 0.15%.

XLK’s dividend yield is 0.77% lower than that of USMV (0.73% vs. 1.5%). Also, XLK yielded on average 6.13% more per year over the past decade (20.02% vs. 13.89%). The expense ratio of XLK is 0.03 percentage points lower than USMV’s (0.12% vs. 0.15%).

Fund Composition

Industry Exposure

XLK vs. USMV - Industry Exposure

XLK USMV
Technology 87.54% 20.53%
Industrials 1.75% 10.51%
Energy 0.0% 0.21%
Communication Services 0.0% 11.03%
Utilities 0.0% 6.93%
Healthcare 0.0% 18.42%
Consumer Defensive 0.0% 12.82%
Real Estate 0.0% 2.73%
Financial Services 10.71% 9.65%
Consumer Cyclical 0.0% 5.53%
Basic Materials 0.0% 1.65%

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 iShares MSCI USA Min Vol Factor ETF (USMV) has the most exposure to the Technology sector at 20.53%. This is followed by Healthcare and Consumer Defensive at 18.42% and 12.82% respectively. Basic Materials (1.65%), Real Estate (2.73%), and Consumer Cyclical (5.53%) only make up 9.91% of the fund’s total assets.

USMV’s mid-section with moderate exposure is comprised of Utilities, Financial Services, Industrials, Communication Services, and Consumer Defensive stocks at 6.93%, 9.65%, 10.51%, 11.03%, and 12.82%.

XLK is 67.01% more exposed to the Technology sector than USMV (87.54% vs 20.53%). XLK’s exposure to Financial Services and Industrials stocks is 1.06% higher and 8.76% lower respectively (10.71% vs. 9.65% and 1.75% vs. 10.51%). In total, Consumer Cyclical, Real Estate, and Consumer Defensive also make up 21.08% less of the fund’s holdings compared to USMV (0.00% vs. 21.08%).

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%.

USMV - Holdings

USMV Holdings Weight
Eli Lilly and Co 1.64%
Microsoft Corp 1.62%
T-Mobile US Inc 1.51%
Accenture PLC Class A 1.51%
Visa Inc Class A 1.49%
Waste Management Inc 1.45%
Adobe Inc 1.45%
The Kroger Co 1.44%
Johnson & Johnson 1.42%
Gilead Sciences Inc 1.42%

USMV’s Top Holdings are Eli Lilly and Co, Microsoft Corp, T-Mobile US Inc, Accenture PLC Class A, and Visa Inc Class A at 1.64%, 1.62%, 1.51%, 1.51%, and 1.49%.

Waste Management Inc (1.45%), Adobe Inc (1.45%), and The Kroger Co (1.44%) have a slightly smaller but still significant weight. Johnson & Johnson and Gilead Sciences Inc are also represented in the USMV’s holdings at 1.42% and 1.42%.

Risk Analysis

XLK USMV
Mean Return 1.7 0
R-squared 73.56 0
Std. Deviation 15.58 0
Alpha 10.43 0
Beta 0.95 0
Sharpe Ratio 1.27 0
Treynor Ratio 21.44 0

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

The iShares MSCI USA Min Vol Factor ETF (USMV) has a Beta of 0 with a Standard Deviation of 0 and a Treynor Ratio of 0. Its Sharpe Ratio is 0 while USMV’s Mean Return is 0. Furthermore, the fund has a Alpha of 0 and a R-squared of 0.

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

Performance

Annual Returns

XLK vs. USMV - Annual Returns

Year XLK USMV
2020 43.67% 5.6%
2019 49.97% 27.77%
2018 -1.56% 1.36%
2017 34.27% 18.97%
2016 14.81% 10.5%
2015 5.62% 5.5%
2014 17.75% 16.34%
2013 25.98% 25.11%
2012 15.47% 11.04%
2011 2.69% 0.0%
2010 11.6% 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 2019 was the strongest year for USMV, returning 27.77% on an annual basis. The poorest year for USMV in the last ten years was 2011, with a yield of 0.0%. Most years the iShares MSCI USA Min Vol Factor ETF has given investors modest returns, such as in 2020, 2016, and 2012, when gains were 5.6%, 10.5%, and 11.04% respectively.

Portfolio Growth

XLK vs. USMV - Portfolio Growth

Fund Initial Balance Final Balance CAGR
XLK $10,000 $51,228 20.02%
USMV $10,000 $27,607 13.89%

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 USMV, the end total would have been $27,607. This equates to a $17,607 profit over 8 years and a compound annual growth rate (CAGR) of 13.89%.

XLK’s CAGR is 6.13 percentage points higher than that of USMV and as a result, would have yielded $23,621 more on a $10,000 investment. Thus, XLK outperformed USMV by 6.13% annually.


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