Backtest: Buy and Hold XLK (The Technology Select Sector SPDR Fund)

This analysis evaluates a buy-and-hold strategy over the past 27 years, providing a historical perspective on XLK's performance from 1998-12-22 to 2025-07-03.

Note: This simulation uses adjusted close prices, meaning all historical prices have been retroactively adjusted for splits and dividends. To achieve similar results in practice, you would need to reinvest all dividends automatically as they are paid.

Performance Overview

Starting with an initial capital of $10,000.00, we purchased shares of XLK on 1998-12-22, at a price of $23.94 per share (adjusted for splits and dividends). No trading, no adjustments — just a simple buy-and-hold approach.

We held the position continuously through every market twist and turn, never selling. As of 2025-07-03, the price of XLK had risen to $256.96. While we didn't sell, we can still assess the performance by calculating the current value of the investment: $107,320.64 — a total gain of 973.21%.

This translates into an annualized return of 9.36% over the entire period. This return is modest — positive, but below the long-term averages of broad-market investments. It may reflect a conservative strategy or a challenging market period.

Drawdown and Risk

The maximum drawdown recorded during this period was 82.05%. This drawdown began after a peak price of $48.19 on 2000-03-27, and reached its lowest point on 2002-10-09 when the price fell to $8.65. The drawdown lasted for 926 days.

The drawdown was very large, indicating high sensitivity to adverse market conditions. Strategies with this profile may offer strong upside but require enduring deep declines. The maximum drawdown lasted over two years, reflecting a prolonged period of market weakness or asset-specific decline. Recovery from such drawdowns can be psychologically and financially difficult.

The Calmar Ratio — annualized return divided by maximum drawdown — was 0.11, reflecting the tradeoff between return and volatility.

The return-to-risk efficiency is weak — drawdowns were relatively large compared to the returns achieved.