The Health Care Select Sector SPDR Fund (XLV) and the iShares U.S. Treasury Bond ETF (GOVT) are both among the Top 100 ETFs. XLV is a SPDR State Street Global Advisors Health fund and GOVT is a iShares Intermediate Government fund. So, what’s the difference between XLV and GOVT? And which fund is better?
The expense ratio of XLV is 0.07 percentage points higher than GOVT’s (0.12% vs. 0.05%). XLV also has a high exposure to the healthcare sector while GOVT is mostly comprised of AAA bonds. Overall, XLV has provided higher returns than GOVT over the past ten years.
In this article, we’ll compare XLV vs. GOVT. We’ll look at performance and fund composition, as well as at their risk metrics and annual returns. Moreover, I’ll also discuss XLV’s and GOVT’s industry exposure, portfolio growth, and holdings and examine how these affect their overall returns.
Summary
| XLV | GOVT | |
| Name | Health Care Select Sector SPDR Fund | iShares U.S. Treasury Bond ETF |
| Category | Health | Intermediate Government |
| Issuer | SPDR State Street Global Advisors | iShares |
| AUM | 27.88B | 17.07B |
| Avg. Return | 15.02% | 2.67% |
| Div. Yield | 1.4% | 1.0% |
| Expense Ratio | 0.12% | 0.05% |
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 iShares U.S. Treasury Bond ETF (GOVT) is a Intermediate Government fund that is issued by iShares. It currently has 17.07B total assets under management and has yielded an average annual return of 2.67% over the past 10 years. The fund has a dividend yield of 1.0% with an expense ratio of 0.05%.
XLV’s dividend yield is 0.40% higher than that of GOVT (1.4% vs. 1.0%). Also, XLV yielded on average 12.35% more per year over the past decade (15.02% vs. 2.67%). The expense ratio of XLV is 0.07 percentage points higher than GOVT’s (0.12% vs. 0.05%).
Fund Composition
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%.
| GOVT Bond Sectors | Weight |
| AAA | 100.0% |
| Others | 0.0% |
| Below B | 0.0% |
| B | 0.0% |
| BB | 0.0% |
| BBB | 0.0% |
| A | 0.0% |
| AA | 0.0% |
| US Government | 0.0% |
GOVT’s Top Bond Sectors are ratings of AAA, Others, Below B, B, and BB at 100.0%, 0.0%, 0.0%, 0.0%, and 0.0%. The fund is less weighted towards BBB (0.0%), A (0.0%), and AA (0.0%) rated bonds.
Risk Analysis
| XLV | GOVT | |
| Mean Return | 1.27 | 0 |
| R-squared | 58.19 | 0 |
| Std. Deviation | 12.94 | 0 |
| Alpha | 7.75 | 0 |
| Beta | 0.7 | 0 |
| Sharpe Ratio | 1.13 | 0 |
| Treynor Ratio | 21.1 | 0 |
The Health Care Select Sector SPDR Fund (XLV) has a Alpha of 7.75 with a Mean Return of 1.27 and a R-squared of 58.19. Its Treynor Ratio is 21.1 while XLV’s Beta is 0.7. Furthermore, the fund has a Standard Deviation of 12.94 and a Sharpe Ratio of 1.13.
The iShares U.S. Treasury Bond ETF (GOVT) has a R-squared of 0 with a Standard Deviation of 0 and a Alpha of 0. Its Sharpe Ratio is 0 while GOVT’s Mean Return is 0. Furthermore, the fund has a Treynor Ratio of 0 and a Beta of 0.
XLV’s Mean Return is 1.27 points higher than that of GOVT and its R-squared is 58.19 points higher. With a Standard Deviation of 12.94, XLV is slightly more volatile than GOVT. The Alpha and Beta of XLV are 7.75 points higher and 0.70 points higher than GOVT’s Alpha and Beta.
Performance
Annual Returns
| Year | XLV | GOVT |
| 2020 | 13.33% | 7.92% |
| 2019 | 20.63% | 6.71% |
| 2018 | 6.3% | 0.74% |
| 2017 | 21.7% | 2.19% |
| 2016 | -2.83% | 0.92% |
| 2015 | 6.82% | 0.76% |
| 2014 | 25.17% | 4.99% |
| 2013 | 41.24% | -2.84% |
| 2012 | 17.56% | 0.0% |
| 2011 | 12.44% | 0.0% |
| 2010 | 2.91% | 0.0% |
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 2020 was the strongest year for GOVT, returning 7.92% on an annual basis. The poorest year for GOVT in the last ten years was 2013, with a yield of -2.84%. Most years the iShares U.S. Treasury Bond ETF has given investors modest returns, such as in 2018, 2015, and 2016, when gains were 0.74%, 0.76%, and 0.92% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| XLV | $10,000 | $32,453 | 15.02% |
| GOVT | $10,000 | $12,297 | 2.67% |
A $10,000 investment in XLV would have resulted in a final balance of $32,453. This is a profit of $22,453 over 8 years and amounts to a compound annual growth rate (CAGR) of 15.02%.
With a $10,000 investment in GOVT, the end total would have been $12,297. This equates to a $2,297 profit over 8 years and a compound annual growth rate (CAGR) of 2.67%.
XLV’s CAGR is 12.35 percentage points higher than that of GOVT and as a result, would have yielded $20,156 more on a $10,000 investment. Thus, XLV outperformed GOVT by 12.35% annually.
Current recommendations:
Over the past years, I have discovered several tools and products that have helped me tremendously on my path to financial freedom:
P.S.: The links below are affiliate links, which means I receive a small commission at no extra cost to you when you sign up for one of the services. Thank you for your support!
1)Personal Capital is simply the best tool out there to track your net worth and plan for financial freedom. Just their retirement planner alone has become an invaluable tool to keep myself on track financially. Try it out, it's free!
2) Take a look at M1 Finance, my favorite broker. I love how easy it is to invest and maintain my portfolio with them. I can set up automatic transfers, rebalance my portfolio with one click and even borrow up to 35% of my assets at super low interest rates!
3) Fundrise is by far the best way I've found to invest in Real Estate. You can diversify your portfolio by investing in their eREITs or even allocate capital to individual properties (without the hassle of managing tenants!).
4) Groundfloor is another great way to get exposure to the real estate sector by investing in short-term, high-yield real estate debt. Current returns are >10% and you can get started with just $10.
5) If you are interested in startup investing, check out Mainvest. I've started allocating a small amount of assets to invest in and support small businesses. Return targets are between 10-25% and you can start with just $100!
To see all of my most up-to-date recommendations, check out the Recommended Tools section.
I believe that money is just a means to an end: to be free to spend your time as you wish, to maximize your positive impact on the world.
