The Health Care Select Sector SPDR Fund (XLV) and the iShares 20+ Year Treasury Bond ETF (TLT) are both among the Top 100 ETFs. XLV is a SPDR State Street Global Advisors Health fund and TLT is a iShares Long Government fund. So, what’s the difference between XLV and TLT? And which fund is better?
The expense ratio of XLV is 0.03 percentage points lower than TLT’s (0.12% vs. 0.15%). XLV also has a high exposure to the healthcare sector while TLT is mostly comprised of AAA bonds. Overall, XLV has provided higher returns than TLT over the past ten years.
In this article, we’ll compare XLV vs. TLT. We’ll look at industry exposure and portfolio growth, as well as at their holdings and performance. Moreover, I’ll also discuss XLV’s and TLT’s fund composition, risk metrics, and annual returns and examine how these affect their overall returns.
|Name||Health Care Select Sector SPDR Fund||iShares 20+ 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 20+ Year Treasury Bond ETF (TLT) is a Long Government fund that is issued by iShares. It currently has 15.15B total assets under management and has yielded an average annual return of 9.00% over the past 10 years. The fund has a dividend yield of 1.5% with an expense ratio of 0.15%.
XLV’s dividend yield is 0.10% lower than that of TLT (1.4% vs. 1.5%). Also, XLV yielded on average 6.03% more per year over the past decade (15.02% vs. 9.00%). The expense ratio of XLV is 0.03 percentage points lower than TLT’s (0.12% vs. 0.15%).
FYI: The best way I've found to invest in ETFs is through M1 Finance. It's free and you even get an instant line of credit! Have a look here (link to M1 Finance).
|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%.
|TLT Bond Sectors||Weight|
TLT’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.
NOTE: The easiest way to add diversification to your portfolio is to invest in real estate through Fundrise. You can become private real estate investor without the burden of property management! Check it out here (link to Fundrise).
The Health Care Select Sector SPDR Fund (XLV) has a Beta of 0.7 with a Treynor Ratio of 21.1 and a Sharpe Ratio of 1.13. Its Standard Deviation is 12.94 while XLV’s R-squared is 58.19. Furthermore, the fund has a Alpha of 7.75 and a Mean Return of 1.27.
The iShares 20+ Year Treasury Bond ETF (TLT) has a R-squared of 68.76 with a Alpha of -2.83 and a Treynor Ratio of 1.82. Its Beta is 3.54 while TLT’s Sharpe Ratio is 0.55. Furthermore, the fund has a Standard Deviation of 12.76 and a Mean Return of 0.63.
XLV’s Mean Return is 0.64 points higher than that of TLT and its R-squared is 10.57 points lower. With a Standard Deviation of 12.94, XLV is slightly more volatile than TLT. The Alpha and Beta of XLV are 10.58 points higher and 2.84 points lower than TLT’s Alpha and Beta.
FYI: Another great way to get exposure to the real estate sector is by investing in real estate debt. Groundfloor offers fantastic short-term, high-yield bonds that can add diversification to your portfolio!
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 TLT, returning 33.6% on an annual basis. The poorest year for TLT in the last ten years was 2013, with a yield of -13.91%. Most years the iShares 20+ Year Treasury Bond ETF has given investors modest returns, such as in 2012, 2017, and 2010, when gains were 3.25%, 8.92%, and 9.25% 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 TLT, the end total would have been $23,809. This equates to a $13,809 profit over 11 years and a compound annual growth rate (CAGR) of 9.00%.
XLV’s CAGR is 6.03 percentage points higher than that of TLT and as a result, would have yielded $20,338 more on a $10,000 investment. Thus, XLV outperformed TLT by 6.03% 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)Personal Capital is simply the best tool out there to track your net worth and plan for financial freedom. Just their retirement planner alone has become an invaluable tool to keep myself on track financially. Try it out, it's free!
2) 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!
3) 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!).
4) Groundfloor is another great way to get exposure to the real estate sector by investing in short-term, high-yield real estate debt. Current returns are >10% and you can get started with just $10.
5) If you are interested in startup investing, check out Mainvest. I've started allocating a small amount of assets to invest in and support small businesses. Return targets are between 10-25% and you can start with just $100!
To see all of my most up-to-date recommendations, check out the Recommended Tools section.