XLV vs. SCHP: What’s The Difference?

The Health Care Select Sector SPDR Fund (XLV) and the Schwab U.S. TIPS ETF (SCHP) are both among the Top 100 ETFs. XLV is a SPDR State Street Global Advisors Health fund and SCHP is a Schwab ETFs Inflation-Protected Bond fund. So, what’s the difference between XLV and SCHP? And which fund is better?

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

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

Summary

XLV SCHP
Name Health Care Select Sector SPDR Fund Schwab U.S. TIPS ETF
Category Health Inflation-Protected Bond
Issuer SPDR State Street Global Advisors Schwab ETFs
AUM 27.88B 18.41B
Avg. Return 15.02% 3.92%
Div. Yield 1.4% 1.97%
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 Schwab U.S. TIPS ETF (SCHP) is a Inflation-Protected Bond fund that is issued by Schwab ETFs. It currently has 18.41B total assets under management and has yielded an average annual return of 3.92% over the past 10 years. The fund has a dividend yield of 1.97% with an expense ratio of 0.05%.

XLV’s dividend yield is 0.57% lower than that of SCHP (1.4% vs. 1.97%). Also, XLV yielded on average 11.11% more per year over the past decade (15.02% vs. 3.92%). The expense ratio of XLV is 0.07 percentage points higher than SCHP’s (0.12% vs. 0.05%).

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%.

SCHP - Holdings

SCHP 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%

SCHP’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 SCHP
Mean Return 1.27 0.28
R-squared 58.19 66.16
Std. Deviation 12.94 4.32
Alpha 7.75 -0.5
Beta 0.7 1.17
Sharpe Ratio 1.13 0.64
Treynor Ratio 21.1 2.31

The Health Care Select Sector SPDR Fund (XLV) has a Sharpe Ratio of 1.13 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 Alpha of 7.75.

The Schwab U.S. TIPS ETF (SCHP) has a Standard Deviation of 4.32 with a Alpha of -0.5 and a Sharpe Ratio of 0.64. Its R-squared is 66.16 while SCHP’s Treynor Ratio is 2.31. Furthermore, the fund has a Mean Return of 0.28 and a Beta of 1.17.

XLV’s Mean Return is 0.99 points higher than that of SCHP and its R-squared is 7.97 points lower. With a Standard Deviation of 12.94, XLV is slightly more volatile than SCHP. The Alpha and Beta of XLV are 8.25 points higher and 0.47 points lower than SCHP’s Alpha and Beta.

Performance

Annual Returns

XLV vs. SCHP - Annual Returns

Year XLV SCHP
2020 13.33% 10.94%
2019 20.63% 8.36%
2018 6.3% -1.31%
2017 21.7% 2.95%
2016 -2.83% 4.6%
2015 6.82% -1.5%
2014 25.17% 3.56%
2013 41.24% -8.66%
2012 17.56% 6.83%
2011 12.44% 13.38%
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 2011 was the strongest year for SCHP, returning 13.38% on an annual basis. The poorest year for SCHP in the last ten years was 2013, with a yield of -8.66%. Most years the Schwab U.S. TIPS ETF has given investors modest returns, such as in 2017, 2014, and 2016, when gains were 2.95%, 3.56%, and 4.6% respectively.

Portfolio Growth

XLV vs. SCHP - Portfolio Growth

Fund Initial Balance Final Balance CAGR
XLV $10,000 $42,899 15.02%
SCHP $10,000 $14,418 3.92%

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 SCHP, the end total would have been $14,418. This equates to a $4,418 profit over 10 years and a compound annual growth rate (CAGR) of 3.92%.

XLV’s CAGR is 11.11 percentage points higher than that of SCHP and as a result, would have yielded $28,481 more on a $10,000 investment. Thus, XLV outperformed SCHP by 11.11% annually.


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