The Technology Select Sector SPDR Fund (XLK) and the Health Care Select Sector SPDR Fund (XLV) are both among the Top 100 ETFs. XLK is a SPDR State Street Global Advisors Technology fund and XLV is a SPDR State Street Global Advisors Health fund. So, what’s the difference between XLK and XLV? And which fund is better?
XLK and XLV 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 higher returns than XLV over the past ten years.
In this article, we’ll compare XLK vs. XLV. We’ll look at risk metrics and performance, as well as at their portfolio growth and annual returns. Moreover, I’ll also discuss XLK’s and XLV’s industry exposure, fund composition, and holdings and examine how these affect their overall returns.
Summary
| XLK | XLV | |
| Name | Technology Select Sector SPDR Fund | Health Care Select Sector SPDR Fund |
| Category | Technology | Health |
| Issuer | SPDR State Street Global Advisors | SPDR State Street Global Advisors |
| AUM | 42.3B | 27.88B |
| Avg. Return | 20.02% | 15.02% |
| Div. Yield | 0.73% | 1.4% |
| Expense Ratio | 0.12% | 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 Health Care Select Sector SPDR Fund (XLV) is a Health fund that is issued by SPDR State Street Global Advisors. It currently has 27.88B total assets under management and has yielded an average annual return of 15.02% over the past 10 years. The fund has a dividend yield of 1.4% with an expense ratio of 0.12%.
XLK’s dividend yield is 0.67% lower than that of XLV (0.73% vs. 1.4%). Also, XLK yielded on average 5.00% more per year over the past decade (20.02% vs. 15.02%). XLK and XLV have the same expense ratio: 0.12%.
Fund Composition
Industry Exposure
| XLK | XLV | |
| Technology | 87.54% | 0.0% |
| Industrials | 1.75% | 0.0% |
| Energy | 0.0% | 0.0% |
| Communication Services | 0.0% | 0.0% |
| Utilities | 0.0% | 0.0% |
| Healthcare | 0.0% | 100.0% |
| Consumer Defensive | 0.0% | 0.0% |
| Real Estate | 0.0% | 0.0% |
| Financial Services | 10.71% | 0.0% |
| Consumer Cyclical | 0.0% | 0.0% |
| Basic Materials | 0.0% | 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 Health Care Select Sector SPDR Fund (XLV) has the most exposure to the Healthcare 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.
XLV’s mid-section with moderate exposure is comprised of Consumer Defensive, Utilities, Communication Services, 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 XLV (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 XLV (0.00% vs. 0.00%).
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%.
| XLV Holdings | Weight |
| Johnson & Johnson | 9.19% |
| UnitedHealth Group Inc | 8.01% |
| Pfizer Inc | 4.64% |
| Abbott Laboratories | 4.36% |
| AbbVie Inc | 4.21% |
| Thermo Fisher Scientific Inc | 4.2% |
| Merck & Co Inc | 4.17% |
| Eli Lilly and Co | 3.87% |
| Danaher Corp | 3.61% |
| Medtronic PLC | 3.54% |
XLV’s Top Holdings are Johnson & Johnson, UnitedHealth Group Inc, Pfizer Inc, Abbott Laboratories, and AbbVie Inc at 9.19%, 8.01%, 4.64%, 4.36%, and 4.21%.
Thermo Fisher Scientific Inc (4.2%), Merck & Co Inc (4.17%), and Eli Lilly and Co (3.87%) have a slightly smaller but still significant weight. Danaher Corp and Medtronic PLC are also represented in the XLV’s holdings at 3.61% and 3.54%.
Risk Analysis
| XLK | XLV | |
| Mean Return | 1.7 | 1.27 |
| R-squared | 73.56 | 58.19 |
| Std. Deviation | 15.58 | 12.94 |
| Alpha | 10.43 | 7.75 |
| Beta | 0.95 | 0.7 |
| Sharpe Ratio | 1.27 | 1.13 |
| Treynor Ratio | 21.44 | 21.1 |
The Technology Select Sector SPDR Fund (XLK) has a Standard Deviation of 15.58 with a Mean Return of 1.7 and a Sharpe Ratio of 1.27. Its R-squared is 73.56 while XLK’s Beta is 0.95. Furthermore, the fund has a Alpha of 10.43 and a Treynor Ratio of 21.44.
The Health Care Select Sector SPDR Fund (XLV) has a Treynor Ratio of 21.1 with a R-squared of 58.19 and a Beta of 0.7. Its Alpha is 7.75 while XLV’s Sharpe Ratio is 1.13. Furthermore, the fund has a Mean Return of 1.27 and a Standard Deviation of 12.94.
XLK’s Mean Return is 0.43 points higher than that of XLV and its R-squared is 15.37 points higher. With a Standard Deviation of 15.58, XLK is slightly more volatile than XLV. The Alpha and Beta of XLK are 2.68 points higher and 0.25 points higher than XLV’s Alpha and Beta.
Performance
Annual Returns
| Year | XLK | XLV |
| 2020 | 43.67% | 13.33% |
| 2019 | 49.97% | 20.63% |
| 2018 | -1.56% | 6.3% |
| 2017 | 34.27% | 21.7% |
| 2016 | 14.81% | -2.83% |
| 2015 | 5.62% | 6.82% |
| 2014 | 17.75% | 25.17% |
| 2013 | 25.98% | 41.24% |
| 2012 | 15.47% | 17.56% |
| 2011 | 2.69% | 12.44% |
| 2010 | 11.6% | 2.91% |
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 XLV, returning 41.24% on an annual basis. The poorest year for XLV in the last ten years was 2016, with a yield of -2.83%. Most years the Health Care Select Sector SPDR Fund has given investors modest returns, such as in 2011, 2020, and 2012, when gains were 12.44%, 13.33%, and 17.56% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| XLK | $10,000 | $67,790 | 20.02% |
| XLV | $10,000 | $44,147 | 15.02% |
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 XLV, the end total would have been $44,147. This equates to a $34,147 profit over 11 years and a compound annual growth rate (CAGR) of 15.02%.
XLK’s CAGR is 5.00 percentage points higher than that of XLV and as a result, would have yielded $23,643 more on a $10,000 investment. Thus, XLK outperformed XLV by 5.00% annually.
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