XLK vs. IYW: State Street Tech ETF Tops iShares Fund in Cost
Key Points
State Street Technology Select Sector SPDR ETF offers a lower expense ratio of 0.08% compared to the 0.38% charged by iShares U.S. Technology ETF
iShares U.S. Technology ETF holds 139 securities compared to 73 for the State Street Technology Select Sector SPDR ETF
State Street Technology Select Sector SPDR ETF manages $113.9 billion in assets under management while iShares U.S. Technology ETF manages $23.8 billion
State Street Technology Select Sector SPDR ETF (NYSEMKT:XLK) provides more cost-efficient access to tech giants with a higher dividend yield, while iShares U.S. Technology ETF (NYSEMKT:IYW) offers broader industry exposure through a larger number of holdings.
Both funds target the fast-growing technology sector, yet they differ in breadth and ownership cost. The iShares fund tracks U.S. technology equities, offering exposure to 139 companies. The SPDR fund mirrors the Technology Select Sector Index, specifically representing the S&P 500 tech segment. While both offer heavy exposure to market leaders, they differ significantly in annual fees.
Snapshot (cost & size)
| Metric | IYW | XLK |
|---|---|---|
| Issuer | iShares | SPDR |
| Expense ratio | 0.38% | 0.08% |
| 1-yr return (as of May 18, 2026) | 47.90% | 49.30% |
| Dividend yield | 0.11% | 0.37% |
| Beta | 1.33 | 1.29 |
| AUM | $23.9 billion | $116.2 billion |
Beta measures price volatility relative to the S&P 500; beta is calculated from five-year monthly returns. The 1-yr return represents total return over the trailing 12 months. Dividend yield is the trailing-12-month distribution yield.
The State Street Technology Select Sector SPDR ETF is the more affordable option, with an expense ratio 0.30 percentage points lower than the iShares U.S. Technology ETF. This cost difference can impact long-term compounding. For income-focused investors, the SPDR fund also offers a higher payout, yielding 0.40% over the trailing 12 months, compared to 0.10% for the iShares fund.
Performance & risk comparison
| Metric | IYW | XLK |
|---|---|---|
| Max drawdown (5 yr) | (39.40%) | (33.60%) |
| Growth of $1,000 over 5 years (total return) | $2,697 | $2,696 |
What's inside
State Street Technology Select Sector SPDR ETF (NYSEMKT:XLK) focuses exclusively on the technology sector, allocating 100.00% to it. The fund holds 73 securities, making it a more concentrated play on large-cap tech. Its largest positions include Nvidia (NASDAQ:NVDA) at 15.11%, Apple (NASDAQ:AAPL) at 12.16%, and Microsoft (NASDAQ:MSFT) at 8.65%. The fund was launched in 1998 and paid $0.76 per share over the trailing 12 months.
Contrastingly, iShares U.S. Technology ETF (NYSEMKT:IYW) has a slightly broader sector reach, with 81.00% in technology and 18.00% in communication services. This inclusion of communication services provides exposure to market dynamics different from those of a pure-tech fund. Its largest positions include Nvidia at 16.68%, Apple at 13.81%, and Alphabet (NASDAQ:GOOGL) at 7.46%. It holds 139 securities, providing more diversification across smaller firms. It was launched in 2000 and has a trailing-12-month dividend of $0.27 per share.
For more guidance on ETF investing, check out the full guide at this link.
Which looks like the better buy
The State Street Technology Select Sector SPDR ETF (XLK) and the iShares U.S. Technology ETF (IYW) are both tech-focused exchange-traded funds (ETFs). Here’s how they match up with one another.
First, there’s XLK. This fund holds 73 stocks, all of which fall within the technology sector. It has a low expense ratio of only 0.08% and a modest dividend yield of 0.4%. As you might expect, top holdings include mega-cap tech stocks like Nvidia, Apple, and Microsoft. Consequently, the fund has delivered excellent returns over the last five years, with a total return of 170% and a compound annual growth rate (CAGR) of 22.0%.
Then, there’s IYW. Much like XLK, this fund focuses on the tech sector, although it holds more stocks and across a broader array of sectors. IYW holds about 140 stocks, with approximately 80% in the tech sector and 20% in the communications sector. Top holdings include Nvidia, Apple, and Alphabet. Its dividend yield is lower than XLK’s, at 0.1%, and its expense ratio is higher at 0.38%. As for past performance, it is very similar, but slightly less than, XLK. IYW has delivered a total return of 166% over the last five years, with a CAGR of 21.6%.
In summary, XLK and IYW have many similarities. However, on several key factors, such as expense ratio, dividend yield, and overall return, XLK comes out on top. Therefore, most investors will likely favor XLK, but both funds remain viable options for investors seeking exposure to the tech sector.
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Jake Lerch has positions in Alphabet and Nvidia. The Motley Fool has positions in and recommends Alphabet, Apple, Microsoft, and Nvidia. The Motley Fool has a disclosure policy.
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