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XLV vs. GOVT: What’s The Difference?

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.

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Summary

XLVGOVT
NameHealth Care Select Sector SPDR FundiShares U.S. Treasury Bond ETF
CategoryHealthIntermediate Government
IssuerSPDR State Street Global AdvisorsiShares
AUM27.88B17.07B
Avg. Return15.02%2.67%
Div. Yield1.4%1.0%
Expense Ratio0.12%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%).

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Fund Composition

Holdings

XLV - Holdings

XLV HoldingsWeight
Johnson & Johnson9.19%
UnitedHealth Group Inc8.01%
Pfizer Inc4.64%
Abbott Laboratories4.36%
AbbVie Inc4.21%
Thermo Fisher Scientific Inc4.2%
Merck & Co Inc4.17%
Eli Lilly and Co3.87%
Danaher Corp3.61%
Medtronic PLC3.54%

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 - Holdings

GOVT Bond SectorsWeight
AAA100.0%
Others0.0%
Below B0.0%
B0.0%
BB0.0%
BBB0.0%
A0.0%
AA0.0%
US Government0.0%

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.

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Risk Analysis

XLVGOVT
Mean Return1.270
R-squared58.190
Std. Deviation12.940
Alpha7.750
Beta0.70
Sharpe Ratio1.130
Treynor Ratio21.10

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.

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Performance

Annual Returns

XLV vs. GOVT - Annual Returns

YearXLVGOVT
202013.33%7.92%
201920.63%6.71%
20186.3%0.74%
201721.7%2.19%
2016-2.83%0.92%
20156.82%0.76%
201425.17%4.99%
201341.24%-2.84%
201217.56%0.0%
201112.44%0.0%
20102.91%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

XLV vs. GOVT - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
XLV$10,000$32,45315.02%
GOVT$10,000$12,2972.67%

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.


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