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XLK vs. XLC: What’s The Difference?

The Technology Select Sector SPDR Fund (XLK) and the Communication Services Select Sector SPDR Fund (XLC) are both among the Top 100 ETFs. XLK is a SPDR State Street Global Advisors Technology fund and XLC is a SPDR State Street Global Advisors Communications fund. So, what’s the difference between XLK and XLC? And which fund is better?

XLK and XLC have the same expense ratio: 0.12%. XLK also has a higher exposure to the technology sector and a higher standard deviation. Overall, XLK has provided lower returns than XLC over the past ten years.

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

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Summary

XLKXLC
NameTechnology Select Sector SPDR FundCommunication Services Select Sector SPDR Fund
CategoryTechnologyCommunications
IssuerSPDR State Street Global AdvisorsSPDR State Street Global Advisors
AUM42.3B14.09B
Avg. Return20.02%29.04%
Div. Yield0.73%0.62%
Expense Ratio0.12%0.12%

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 Communication Services Select Sector SPDR Fund (XLC) is a Communications fund that is issued by SPDR State Street Global Advisors. It currently has 14.09B total assets under management and has yielded an average annual return of 29.04% over the past 10 years. The fund has a dividend yield of 0.62% with an expense ratio of 0.12%.

XLK’s dividend yield is 0.11% higher than that of XLC (0.73% vs. 0.62%). Also, XLK yielded on average 9.01% less per year over the past decade (20.02% vs. 29.04%). XLK and XLC have the same expense ratio: 0.12%.

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Fund Composition

Industry Exposure

XLK vs. XLC - Industry Exposure

XLKXLC
Technology87.54%0.0%
Industrials1.75%0.0%
Energy0.0%0.0%
Communication Services0.0%100.0%
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 Communication Services Select Sector SPDR Fund (XLC) has the most exposure to the Communication Services sector at 100.0%. This is followed by Technology and Industrials 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.

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

XLK is 87.54% more exposed to the Technology sector than XLC (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 XLC (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%.

XLC - Holdings

XLC HoldingsWeight
Facebook Inc A23.75%
Alphabet Inc A11.49%
Alphabet Inc Class C11.16%
Netflix Inc4.78%
Charter Communications Inc A4.65%
Comcast Corp Class A4.44%
T-Mobile US Inc4.41%
The Walt Disney Co4.39%
AT&T Inc4.35%
Verizon Communications Inc4.33%

XLC’s Top Holdings are Facebook Inc A, Alphabet Inc A, Alphabet Inc Class C, Netflix Inc, and Charter Communications Inc A at 23.75%, 11.49%, 11.16%, 4.78%, and 4.65%.

Comcast Corp Class A (4.44%), T-Mobile US Inc (4.41%), and The Walt Disney Co (4.39%) have a slightly smaller but still significant weight. AT&T Inc and Verizon Communications Inc are also represented in the XLC’s holdings at 4.35% and 4.33%.

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Risk Analysis

XLKXLC
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 Treynor Ratio of 21.44 with a Sharpe Ratio of 1.27 and a Standard Deviation of 15.58. Its Alpha is 10.43 while XLK’s Beta is 0.95. Furthermore, the fund has a Mean Return of 1.7 and a R-squared of 73.56.

The Communication Services Select Sector SPDR Fund (XLC) has a Alpha of 0 with a Standard Deviation of 0 and a R-squared of 0. Its Beta is 0 while XLC’s Mean Return is 0. Furthermore, the fund has a Treynor Ratio of 0 and a Sharpe Ratio of 0.

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

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Performance

Annual Returns

XLK vs. XLC - Annual Returns

YearXLKXLC
202043.67%26.85%
201949.97%31.22%
2018-1.56%0.0%
201734.27%0.0%
201614.81%0.0%
20155.62%0.0%
201417.75%0.0%
201325.98%0.0%
201215.47%0.0%
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 2019 was the strongest year for XLC, returning 31.22% on an annual basis. The poorest year for XLC in the last ten years was 2018, with a yield of 0.0%. Most years the Communication Services Select Sector SPDR Fund has given investors modest returns, such as in 2014, 2013, and 2012, when gains were 0.0%, 0.0%, and 0.0% respectively.

Portfolio Growth

XLK vs. XLC - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
XLK$10,000$21,54620.02%
XLC$10,000$16,64529.04%

A $10,000 investment in XLK would have resulted in a final balance of $21,546. This is a profit of $11,546 over 2 years and amounts to a compound annual growth rate (CAGR) of 20.02%.

With a $10,000 investment in XLC, the end total would have been $16,645. This equates to a $6,645 profit over 2 years and a compound annual growth rate (CAGR) of 29.04%.

XLK’s CAGR is 9.01 percentage points lower than that of XLC and as a result, would have yielded $4,901 more on a $10,000 investment. Thus, XLK performed worse than XLC by 9.01% annually.


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