The Health Care Select Sector SPDR Fund (XLV) and the Schwab U.S. Small-Cap ETF (SCHA) are both among the Top 100 ETFs. XLV is a SPDR State Street Global Advisors Health fund and SCHA is a Schwab ETFs Small Blend fund. So, what’s the difference between XLV and SCHA? And which fund is better?
The expense ratio of XLV is 0.08 percentage points higher than SCHA’s (0.12% vs. 0.04%). XLV also has a higher exposure to the healthcare sector and a lower standard deviation. Overall, XLV has provided higher returns than SCHA over the past ten years.
In this article, we’ll compare XLV vs. SCHA. We’ll look at annual returns and industry exposure, as well as at their holdings and portfolio growth. Moreover, I’ll also discuss XLV’s and SCHA’s risk metrics, fund composition, and performance and examine how these affect their overall returns.
|Name||Health Care Select Sector SPDR Fund||Schwab U.S. Small-Cap ETF|
|Issuer||SPDR State Street Global Advisors||Schwab ETFs|
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 Schwab U.S. Small-Cap ETF (SCHA) is a Small Blend fund that is issued by Schwab ETFs. It currently has 16.51B total assets under management and has yielded an average annual return of 12.62% over the past 10 years. The fund has a dividend yield of 0.98% with an expense ratio of 0.04%.
XLV’s dividend yield is 0.42% higher than that of SCHA (1.4% vs. 0.98%). Also, XLV yielded on average 2.40% more per year over the past decade (15.02% vs. 12.62%). The expense ratio of XLV is 0.08 percentage points higher than SCHA’s (0.12% vs. 0.04%).
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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 Schwab U.S. Small-Cap ETF (SCHA) has the most exposure to the Healthcare sector at 16.5%. This is followed by Industrials and Technology at 15.37% and 14.91% respectively. Energy (3.35%), Communication Services (3.5%), and Consumer Defensive (3.75%) only make up 10.60% of the fund’s total assets.
SCHA’s mid-section with moderate exposure is comprised of Basic Materials, Real Estate, Consumer Cyclical, Financial Services, and Technology stocks at 3.98%, 7.83%, 14.48%, 14.49%, and 14.91%.
XLV is 83.50% more exposed to the Healthcare sector than SCHA (100.0% vs 16.5%). XLV’s exposure to Technology and Industrials stocks is 14.91% lower and 15.37% lower respectively (0.0% vs. 14.91% and 0.0% vs. 15.37%). In total, Consumer Cyclical, Financial Services, and Real Estate also make up 36.80% less of the fund’s holdings compared to SCHA (0.00% vs. 36.80%).
|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%.
|AMC Entertainment Holdings Inc Class A||0.67%|
|Caesars Entertainment Inc||0.51%|
|Plug Power Inc||0.41%|
|10x Genomics Inc Ordinary Shares – Class A||0.34%|
|GameStop Corp Class A||0.28%|
|Penn National Gaming Inc||0.27%|
|Axon Enterprise Inc||0.27%|
SCHA’s Top Holdings are AMC Entertainment Holdings Inc Class A, Caesars Entertainment Inc, Cloudflare Inc, NovoCure Ltd, and Plug Power Inc at 0.67%, 0.51%, 0.48%, 0.45%, and 0.41%.
10x Genomics Inc Ordinary Shares – Class A (0.34%), GameStop Corp Class A (0.28%), and RH (0.27%) have a slightly smaller but still significant weight. Penn National Gaming Inc and Axon Enterprise Inc are also represented in the SCHA’s holdings at 0.27% and 0.27%.
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The Health Care Select Sector SPDR Fund (XLV) has a Treynor Ratio of 21.1 with a Sharpe Ratio of 1.13 and a R-squared of 58.19. Its Alpha is 7.75 while XLV’s Mean Return is 1.27. Furthermore, the fund has a Standard Deviation of 12.94 and a Beta of 0.7.
The Schwab U.S. Small-Cap ETF (SCHA) has a Beta of 1.25 with a Mean Return of 1.14 and a Alpha of -4.65. Its Standard Deviation is 18.68 while SCHA’s R-squared is 82.26. Furthermore, the fund has a Treynor Ratio of 9.62 and a Sharpe Ratio of 0.7.
XLV’s Mean Return is 0.13 points higher than that of SCHA and its R-squared is 24.07 points lower. With a Standard Deviation of 12.94, XLV is slightly less volatile than SCHA. The Alpha and Beta of XLV are 12.40 points higher and 0.55 points lower than SCHA’s Alpha and Beta.
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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 SCHA, returning 39.59% on an annual basis. The poorest year for SCHA in the last ten years was 2018, with a yield of -11.75%. Most years the Schwab U.S. Small-Cap ETF has given investors modest returns, such as in 2017, 2012, and 2020, when gains were 15.04%, 18.24%, and 19.35% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in XLV would have resulted in a final balance of $42,899. This is a profit of $32,899 over 10 years and amounts to a compound annual growth rate (CAGR) of 15.02%.
With a $10,000 investment in SCHA, the end total would have been $30,035. This equates to a $20,035 profit over 10 years and a compound annual growth rate (CAGR) of 12.62%.
XLV’s CAGR is 2.40 percentage points higher than that of SCHA and as a result, would have yielded $12,864 more on a $10,000 investment. Thus, XLV outperformed SCHA by 2.40% annually.
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