XLV vs. MUB: What’s The Difference?

The Health Care Select Sector SPDR Fund (XLV) and the iShares National Muni Bond ETF (MUB) are both among the Top 100 ETFs. XLV is a SPDR State Street Global Advisors Health fund and MUB is a iShares Muni National Interm fund. So, what’s the difference between XLV and MUB? And which fund is better?

The expense ratio of XLV is 0.05 percentage points higher than MUB’s (0.12% vs. 0.07%). XLV also has a high exposure to the healthcare sector while MUB is mostly comprised of AA bonds. Overall, XLV has provided higher returns than MUB over the past ten years.

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

Summary

XLV MUB
Name Health Care Select Sector SPDR Fund iShares National Muni Bond ETF
Category Health Muni National Interm
Issuer SPDR State Street Global Advisors iShares
AUM 27.88B 22.71B
Avg. Return 15.02% 4.04%
Div. Yield 1.4% 1.96%
Expense Ratio 0.12% 0.07%

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 National Muni Bond ETF (MUB) is a Muni National Interm fund that is issued by iShares. It currently has 22.71B total assets under management and has yielded an average annual return of 4.04% over the past 10 years. The fund has a dividend yield of 1.96% with an expense ratio of 0.07%.

XLV’s dividend yield is 0.56% lower than that of MUB (1.4% vs. 1.96%). Also, XLV yielded on average 10.99% more per year over the past decade (15.02% vs. 4.04%). The expense ratio of XLV is 0.05 percentage points higher than MUB’s (0.12% vs. 0.07%).

Fund Composition

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%.

MUB - Holdings

MUB Bond Sectors Weight
AA 60.38%
AAA 18.39%
A 15.04%
BBB 6.0%
Others 0.17%
BB 0.02%
Below B 0.0%
B 0.0%
US Government 0.0%

MUB’s Top Bond Sectors are ratings of AA, AAA, A, BBB, and Others at 60.38%, 18.39%, 15.04%, 6.0%, and 0.17%. The fund is less weighted towards BB (0.02%), Below B (0.0%), and B (0.0%) rated bonds.

Risk Analysis

XLV MUB
Mean Return 1.27 0.32
R-squared 58.19 99
Std. Deviation 12.94 3.68
Alpha 7.75 -0.46
Beta 0.7 1.01
Sharpe Ratio 1.13 0.88
Treynor Ratio 21.1 3.2

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

The iShares National Muni Bond ETF (MUB) has a Beta of 1.01 with a Mean Return of 0.32 and a Treynor Ratio of 3.2. Its Standard Deviation is 3.68 while MUB’s Alpha is -0.46. Furthermore, the fund has a Sharpe Ratio of 0.88 and a R-squared of 99.

XLV’s Mean Return is 0.95 points higher than that of MUB and its R-squared is 40.81 points lower. With a Standard Deviation of 12.94, XLV is slightly more volatile than MUB. The Alpha and Beta of XLV are 8.21 points higher and 0.31 points lower than MUB’s Alpha and Beta.

Performance

Annual Returns

XLV vs. MUB - Annual Returns

Year XLV MUB
2020 13.33% 4.87%
2019 20.63% 7.28%
2018 6.3% 0.86%
2017 21.7% 4.61%
2016 -2.83% 0.06%
2015 6.82% 2.99%
2014 25.17% 8.61%
2013 41.24% -3.26%
2012 17.56% 6.14%
2011 12.44% 10.85%
2010 2.91% 1.4%

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 MUB, returning 10.85% on an annual basis. The poorest year for MUB in the last ten years was 2013, with a yield of -3.26%. Most years the iShares National Muni Bond ETF has given investors modest returns, such as in 2015, 2017, and 2020, when gains were 2.99%, 4.61%, and 4.87% respectively.

Portfolio Growth

XLV vs. MUB - Portfolio Growth

Fund Initial Balance Final Balance CAGR
XLV $10,000 $44,147 15.02%
MUB $10,000 $15,333 4.04%

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 MUB, the end total would have been $15,333. This equates to a $5,333 profit over 11 years and a compound annual growth rate (CAGR) of 4.04%.

XLV’s CAGR is 10.99 percentage points higher than that of MUB and as a result, would have yielded $28,814 more on a $10,000 investment. Thus, XLV outperformed MUB by 10.99% annually.


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