XLV vs. DFAC: What’s The Difference?

The Health Care Select Sector SPDR Fund (XLV) and the Dimensional U.S. Core Equity 2 ETF (DFAC) are both among the Top 100 ETFs. XLV is a SPDR State Street Global Advisors Health fund and DFAC is a Dimensional Fund Advisors Large Blend fund. So, what’s the difference between XLV and DFAC? And which fund is better?

The expense ratio of XLV is 0.07 percentage points lower than DFAC’s (0.12% vs. 0.19%). XLV also has a higher exposure to the healthcare sector and a lower standard deviation. Overall, XLV has provided higher returns than DFAC over the past ten years.

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

Summary

XLV DFAC
Name Health Care Select Sector SPDR Fund Dimensional U.S. Core Equity 2 ETF
Category Health Large Blend
Issuer SPDR State Street Global Advisors Dimensional Fund Advisors
AUM 27.88B 13.53B
Avg. Return 15.02% 13.93%
Div. Yield 1.4% 1.0%
Expense Ratio 0.12% 0.19%

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%.

The Dimensional U.S. Core Equity 2 ETF (DFAC) is a Large Blend fund that is issued by Dimensional Fund Advisors. It currently has 13.53B total assets under management and has yielded an average annual return of 13.93% over the past 10 years. The fund has a dividend yield of 1.0% with an expense ratio of 0.19%.

XLV’s dividend yield is 0.40% higher than that of DFAC (1.4% vs. 1.0%). Also, XLV yielded on average 1.09% more per year over the past decade (15.02% vs. 13.93%). The expense ratio of XLV is 0.07 percentage points lower than DFAC’s (0.12% vs. 0.19%).

Fund Composition

Industry Exposure

XLV vs. DFAC - Industry Exposure

XLV DFAC
Technology 0.0% 22.81%
Industrials 0.0% 14.13%
Energy 0.0% 2.67%
Communication Services 0.0% 7.63%
Utilities 0.0% 1.54%
Healthcare 100.0% 12.09%
Consumer Defensive 0.0% 5.94%
Real Estate 0.0% 0.37%
Financial Services 0.0% 16.17%
Consumer Cyclical 0.0% 13.09%
Basic Materials 0.0% 3.56%

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%.

The Dimensional U.S. Core Equity 2 ETF (DFAC) has the most exposure to the Technology sector at 22.81%. This is followed by Financial Services and Industrials at 16.17% and 14.13% respectively. Utilities (1.54%), Energy (2.67%), and Basic Materials (3.56%) only make up 7.77% of the fund’s total assets.

DFAC’s mid-section with moderate exposure is comprised of Consumer Defensive, Communication Services, Healthcare, Consumer Cyclical, and Industrials stocks at 5.94%, 7.63%, 12.09%, 13.09%, and 14.13%.

XLV is 87.91% more exposed to the Healthcare sector than DFAC (100.0% vs 12.09%). XLV’s exposure to Technology and Industrials stocks is 22.81% lower and 14.13% lower respectively (0.0% vs. 22.81% and 0.0% vs. 14.13%). In total, Consumer Cyclical, Financial Services, and Real Estate also make up 29.63% less of the fund’s holdings compared to DFAC (0.00% vs. 29.63%).

Holdings

XLV - Holdings

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%.

DFAC - Holdings

DFAC Holdings Weight
Apple Inc 4.7%
Microsoft Corp 3.81%
Amazon.com Inc 2.39%
Johnson & Johnson 1.05%
Facebook Inc Class A 1.05%
JPMorgan Chase & Co 1.0%
Alphabet Inc Class C 0.85%
Alphabet Inc Class A 0.84%
Berkshire Hathaway Inc Class B 0.75%
Visa Inc Class A 0.74%

DFAC’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Johnson & Johnson, and Facebook Inc Class A at 4.7%, 3.81%, 2.39%, 1.05%, and 1.05%.

JPMorgan Chase & Co (1.0%), Alphabet Inc Class C (0.85%), and Alphabet Inc Class A (0.84%) have a slightly smaller but still significant weight. Berkshire Hathaway Inc Class B and Visa Inc Class A are also represented in the DFAC’s holdings at 0.75% and 0.74%.

Risk Analysis

XLV DFAC
Mean Return 1.27 1.19
R-squared 58.19 95.1
Std. Deviation 12.94 15.55
Alpha 7.75 -2.75
Beta 0.7 1.12
Sharpe Ratio 1.13 0.88
Treynor Ratio 21.1 11.85

The Health Care Select Sector SPDR Fund (XLV) has a Standard Deviation of 12.94 with a Beta of 0.7 and a Sharpe Ratio of 1.13. Its Alpha is 7.75 while XLV’s Treynor Ratio is 21.1. Furthermore, the fund has a Mean Return of 1.27 and a R-squared of 58.19.

The Dimensional U.S. Core Equity 2 ETF (DFAC) has a Treynor Ratio of 11.85 with a Standard Deviation of 15.55 and a R-squared of 95.1. Its Sharpe Ratio is 0.88 while DFAC’s Beta is 1.12. Furthermore, the fund has a Mean Return of 1.19 and a Alpha of -2.75.

XLV’s Mean Return is 0.08 points higher than that of DFAC and its R-squared is 36.91 points lower. With a Standard Deviation of 12.94, XLV is slightly less volatile than DFAC. The Alpha and Beta of XLV are 10.50 points higher and 0.42 points lower than DFAC’s Alpha and Beta.

Performance

Annual Returns

XLV vs. DFAC - Annual Returns

Year XLV DFAC
2020 13.33% 15.8%
2019 20.63% 29.54%
2018 6.3% -9.43%
2017 21.7% 18.82%
2016 -2.83% 16.31%
2015 6.82% -2.53%
2014 25.17% 9.56%
2013 41.24% 37.55%
2012 17.56% 17.93%
2011 12.44% -1.96%
2010 2.91% 21.67%

XLV had its best year in 2013 with an annual return of 41.24%. XLV’s worst year over the past decade yielded -2.83% and occurred in 2016. In most years the Health Care Select Sector SPDR Fund provided moderate returns such as in 2011, 2020, and 2012 where annual returns amounted to 12.44%, 13.33%, and 17.56% respectively.

The year 2013 was the strongest year for DFAC, returning 37.55% on an annual basis. The poorest year for DFAC in the last ten years was 2018, with a yield of -9.43%. Most years the Dimensional U.S. Core Equity 2 ETF has given investors modest returns, such as in 2020, 2016, and 2012, when gains were 15.8%, 16.31%, and 17.93% respectively.

Portfolio Growth

XLV vs. DFAC - Portfolio Growth

Fund Initial Balance Final Balance CAGR
XLV $10,000 $44,147 15.02%
DFAC $10,000 $38,796 13.93%

A $10,000 investment in XLV would have resulted in a final balance of $44,147. This is a profit of $34,147 over 11 years and amounts to a compound annual growth rate (CAGR) of 15.02%.

With a $10,000 investment in DFAC, the end total would have been $38,796. This equates to a $28,796 profit over 11 years and a compound annual growth rate (CAGR) of 13.93%.

XLV’s CAGR is 1.09 percentage points higher than that of DFAC and as a result, would have yielded $5,351 more on a $10,000 investment. Thus, XLV outperformed DFAC by 1.09% annually.


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