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XLK vs. XLI: What’s The Difference?

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

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

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

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Summary

XLKXLI
NameTechnology Select Sector SPDR FundIndustrial Select Sector SPDR Fund
CategoryTechnologyIndustrials
IssuerSPDR State Street Global AdvisorsSPDR State Street Global Advisors
AUM42.3B19.33B
Avg. Return20.02%14.44%
Div. Yield0.73%1.25%
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 Industrial Select Sector SPDR Fund (XLI) is a Industrials fund that is issued by SPDR State Street Global Advisors. It currently has 19.33B total assets under management and has yielded an average annual return of 14.44% over the past 10 years. The fund has a dividend yield of 1.25% with an expense ratio of 0.12%.

XLK’s dividend yield is 0.52% lower than that of XLI (0.73% vs. 1.25%). Also, XLK yielded on average 5.58% more per year over the past decade (20.02% vs. 14.44%). XLK and XLI have the same expense ratio: 0.12%.

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Fund Composition

Industry Exposure

XLK vs. XLI - Industry Exposure

XLKXLI
Technology87.54%1.82%
Industrials1.75%97.49%
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%0.69%
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 Industrial Select Sector SPDR Fund (XLI) has the most exposure to the Industrials sector at 97.49%. This is followed by Technology and Consumer Cyclical at 1.82% and 0.69% respectively. Financial Services (0.0%), Real Estate (0.0%), and Consumer Defensive (0.0%) only make up 0.00% of the fund’s total assets.

XLI’s mid-section with moderate exposure is comprised of Healthcare, Utilities, Communication Services, Energy, and Consumer Cyclical stocks at 0.0%, 0.0%, 0.0%, 0.0%, and 0.69%.

XLK is 85.72% more exposed to the Technology sector than XLI (87.54% vs 1.82%). XLK’s exposure to Financial Services and Industrials stocks is 10.71% higher and 95.74% lower respectively (10.71% vs. 0.0% and 1.75% vs. 97.49%). In total, Consumer Cyclical, Real Estate, and Consumer Defensive also make up 0.69% less of the fund’s holdings compared to XLI (0.00% vs. 0.69%).

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%.

XLI - Holdings

XLI HoldingsWeight
Honeywell International Inc4.9%
United Parcel Service Inc Class B4.84%
Union Pacific Corp4.7%
Boeing Co4.24%
Raytheon Technologies Corp4.16%
Caterpillar Inc3.84%
General Electric Co3.8%
3M Co3.7%
Deere & Co3.54%
Lockheed Martin Corp2.98%

XLI’s Top Holdings are Honeywell International Inc, United Parcel Service Inc Class B, Union Pacific Corp, Boeing Co, and Raytheon Technologies Corp at 4.9%, 4.84%, 4.7%, 4.24%, and 4.16%.

Caterpillar Inc (3.84%), General Electric Co (3.8%), and 3M Co (3.7%) have a slightly smaller but still significant weight. Deere & Co and Lockheed Martin Corp are also represented in the XLI’s holdings at 3.54% and 2.98%.

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Risk Analysis

XLKXLI
Mean Return1.71.14
R-squared73.5678.97
Std. Deviation15.5817.13
Alpha10.432.38
Beta0.951.08
Sharpe Ratio1.270.76
Treynor Ratio21.4411.34

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

The Industrial Select Sector SPDR Fund (XLI) has a Alpha of 2.38 with a Sharpe Ratio of 0.76 and a Beta of 1.08. Its Standard Deviation is 17.13 while XLI’s Treynor Ratio is 11.34. Furthermore, the fund has a Mean Return of 1.14 and a R-squared of 78.97.

XLK’s Mean Return is 0.56 points higher than that of XLI and its R-squared is 5.41 points lower. With a Standard Deviation of 15.58, XLK is slightly less volatile than XLI. The Alpha and Beta of XLK are 8.05 points higher and 0.13 points lower than XLI’s Alpha and Beta.

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Performance

Annual Returns

XLK vs. XLI - Annual Returns

YearXLKXLI
202043.67%11.0%
201949.97%29.11%
2018-1.56%-13.1%
201734.27%23.85%
201614.81%19.93%
20155.62%-4.27%
201417.75%10.44%
201325.98%40.44%
201215.47%14.86%
20112.69%-1.01%
201011.6%27.62%

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 XLI, returning 40.44% on an annual basis. The poorest year for XLI in the last ten years was 2018, with a yield of -13.1%. Most years the Industrial Select Sector SPDR Fund has given investors modest returns, such as in 2020, 2012, and 2016, when gains were 11.0%, 14.86%, and 19.93% respectively.

Portfolio Growth

XLK vs. XLI - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
XLK$10,000$67,79020.02%
XLI$10,000$39,85314.44%

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 XLI, the end total would have been $39,853. This equates to a $29,853 profit over 11 years and a compound annual growth rate (CAGR) of 14.44%.

XLK’s CAGR is 5.58 percentage points higher than that of XLI and as a result, would have yielded $27,937 more on a $10,000 investment. Thus, XLK outperformed XLI by 5.58% annually.


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