The Health Care Select Sector SPDR Fund (XLV) and the iShares 7-10 Year Treasury Bond ETF (IEF) are both among the Top 100 ETFs. XLV is a SPDR State Street Global Advisors Health fund and IEF is a iShares Long Government fund. So, what’s the difference between XLV and IEF? And which fund is better?
The expense ratio of XLV is 0.03 percentage points lower than IEF’s (0.12% vs. 0.15%). XLV also has a high exposure to the healthcare sector while IEF is mostly comprised of AAA bonds. Overall, XLV has provided higher returns than IEF over the past ten years.
In this article, we’ll compare XLV vs. IEF. We’ll look at fund composition and annual returns, as well as at their risk metrics and holdings. Moreover, I’ll also discuss XLV’s and IEF’s performance, portfolio growth, and industry exposure and examine how these affect their overall returns.
|Name||Health Care Select Sector SPDR Fund||iShares 7-10 Year Treasury Bond ETF|
|Issuer||SPDR State Street Global Advisors||iShares|
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 7-10 Year Treasury Bond ETF (IEF) is a Long Government fund that is issued by iShares. It currently has 13.44B total assets under management and has yielded an average annual return of 5.06% over the past 10 years. The fund has a dividend yield of 0.84% with an expense ratio of 0.15%.
XLV’s dividend yield is 0.56% higher than that of IEF (1.4% vs. 0.84%). Also, XLV yielded on average 9.96% more per year over the past decade (15.02% vs. 5.06%). The expense ratio of XLV is 0.03 percentage points lower than IEF’s (0.12% vs. 0.15%).
|Johnson & Johnson||9.19%|
|UnitedHealth Group Inc||8.01%|
|Thermo Fisher Scientific Inc||4.2%|
|Merck & Co Inc||4.17%|
|Eli Lilly and Co||3.87%|
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%.
|IEF Bond Sectors||Weight|
IEF’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.
The Health Care Select Sector SPDR Fund (XLV) has a R-squared of 58.19 with a Alpha of 7.75 and a Beta of 0.7. Its Mean Return is 1.27 while XLV’s Standard Deviation is 12.94. Furthermore, the fund has a Sharpe Ratio of 1.13 and a Treynor Ratio of 21.1.
The iShares 7-10 Year Treasury Bond ETF (IEF) has a Alpha of -1.2 with a Sharpe Ratio of 0.6 and a Beta of 1.59. Its R-squared is 77.56 while IEF’s Treynor Ratio is 1.97. Furthermore, the fund has a Standard Deviation of 5.42 and a Mean Return of 0.32.
XLV’s Mean Return is 0.95 points higher than that of IEF and its R-squared is 19.37 points lower. With a Standard Deviation of 12.94, XLV is slightly more volatile than IEF. The Alpha and Beta of XLV are 8.95 points higher and 0.89 points lower than IEF’s Alpha and Beta.
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 2011 was the strongest year for IEF, returning 15.46% on an annual basis. The poorest year for IEF in the last ten years was 2013, with a yield of -6.12%. Most years the iShares 7-10 Year Treasury Bond ETF has given investors modest returns, such as in 2017, 2012, and 2019, when gains were 2.47%, 4.06%, and 8.38% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
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 IEF, the end total would have been $16,936. This equates to a $6,936 profit over 11 years and a compound annual growth rate (CAGR) of 5.06%.
XLV’s CAGR is 9.96 percentage points higher than that of IEF and as a result, would have yielded $27,211 more on a $10,000 investment. Thus, XLV outperformed IEF by 9.96% annually.
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) 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!
2) 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!).
3) If you are interested in crypto, check out Gemini. I've started allocating a small amount of assets to the growing crypto space and Gemini has just been a breeze to use. Once you register, make sure to also open an Active Trader account to buy crypto at the lowest fees on the market (just 0.03%!).
To see all of my most up-to-date recommendations, check out the Recommended Tools section.