Key Points
XLK offers a lower expense ratio and higher dividend yield than IYW.
IYW has delivered stronger one- and five-year returns and holds more stocks across a broader tech sector mix.
IYW is higher risk, with a deeper five-year drawdown and a higher beta.
The State Street Technology Select Sector SPDR ETF(NYSEMKT:XLK) and the iShares U.S. Technology ETF(NYSEMKT:IYW) both aim to capture the performance of the U.S. technology sector, appealing to investors seeking growth through leading tech companies.
This comparison examines their costs, risk profiles, and portfolio makeup to help clarify which fund may appeal to different investors.
Snapshot (cost & size)
| Metric | XLK | IYW |
|---|---|---|
| Issuer | SPDR | iShares |
| Expense ratio | 0.08% | 0.38% |
| 1-yr return (as of March 15, 2026) | 27.89% | 28.22% |
| Dividend yield | 0.56% | 0.15% |
| Beta (5Y monthly) | 1.24 | 1.28 |
| AUM | $87.7 billion | $19.4 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.
XLK is more affordable than IYW, with a significantly lower expense ratio. XLK also offers a higher dividend yield, which could appeal to investors seeking long-term passive dividend income.
Performance & risk comparison
| Metric | XLK | IYW |
|---|---|---|
| Max drawdown (5 y) | -33.56% | -39.44% |
| Growth of $1,000 over 5 years | $2,082 | $2,163 |
What's inside
IYW tracks the U.S. technology sector, holding 140 stocks. Its sector allocation is 89% technology, with small allocations to communication services, industrials, and consumer cyclical, and its top holdings include Nvidia, Apple, and Microsoft. The fund was launched 25 years ago, offering investors a long track record and broad diversification within tech and related segments.
By contrast, XLK is focused almost exclusively on technology stocks. It holds just 71 positions, with 99% of assets devoted to tech. Its top three holdings match IYW’s, and having launched around 28 years ago, it offers a similarly long history.
For more guidance on ETF investing, check out the full guide at this link.
What this means for investors
Both XLK and IYW provide access to leading U.S. technology companies, but their difference in diversification is an important factor for investors to consider.
IYW holds roughly twice as many stocks as XLK, but it leans more heavily on its top holdings. While both funds share the same top three stocks, those positions make up 44.43% of IYW’s portfolio compared to 37.91% for XLK.
This means that while IYW provides exposure to a broader swath of the tech sector and related industries, it’s more concentrated on mega-cap tech giants. If Nvidia, Apple, and Microsoft significantly under- or overperform, it will likely affect IYW more than XLK.
Case in point: IYW has experienced a steeper five-year drawdown, but it’s also slightly outperformed XLK in one- and five-year total returns.
Fees and income are other factors to consider with these two funds. XLK has an edge on both fronts, with a lower expense ratio and higher dividend yield. Investors can expect to pay $8 per year in fees for every $10,000 invested in XLK, compared to $38 per year for every $10,000 in IYW. While it’s a marginal difference on the surface, it can add up for long-term investors.
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Katie Brockman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple, Microsoft, and Nvidia and is short shares of Apple. The Motley Fool has a disclosure policy.
