The iShares Core U.S. Aggregate Bond ETF (AGG) and the Consumer Discretionary Select Sector SPDR Fund (XLY) are both among the Top 100 ETFs. AGG is a iShares Intermediate-Term Bond fund and XLY is a SPDR State Street Global Advisors Consumer Cyclical fund. So, what’s the difference between AGG and XLY? And which fund is better?
The expense ratio of AGG is 0.08 percentage points lower than XLY’s (0.04% vs. 0.12%). AGG is mostly comprised of AAA bonds while XLY has a high exposure to the consumer cyclical sector. Overall, AGG has provided lower returns than XLY over the past ten years.
In this article, we’ll compare AGG vs. XLY. We’ll look at annual returns and industry exposure, as well as at their risk metrics and performance. Moreover, I’ll also discuss AGG’s and XLY’s fund composition, portfolio growth, and holdings and examine how these affect their overall returns.
|Name||iShares Core U.S. Aggregate Bond ETF||Consumer Discretionary Select Sector SPDR Fund|
|Category||Intermediate-Term Bond||Consumer Cyclical|
|Issuer||iShares||SPDR State Street Global Advisors|
The iShares Core U.S. Aggregate Bond ETF (AGG) is a Intermediate-Term Bond fund that is issued by iShares. It currently has 88.8B total assets under management and has yielded an average annual return of 4.04% over the past 10 years. The fund has a dividend yield of 1.95% with an expense ratio of 0.04%.
The Consumer Discretionary Select Sector SPDR Fund (XLY) is a Consumer Cyclical fund that is issued by SPDR State Street Global Advisors. It currently has 20.21B total assets under management and has yielded an average annual return of 18.86% over the past 10 years. The fund has a dividend yield of 0.63% with an expense ratio of 0.12%.
AGG’s dividend yield is 1.32% higher than that of XLY (1.95% vs. 0.63%). Also, AGG yielded on average 14.82% less per year over the past decade (4.04% vs. 18.86%). The expense ratio of AGG is 0.08 percentage points lower than XLY’s (0.04% vs. 0.12%).
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|AGG Bond Sectors||Weight|
AGG’s Top Bond Sectors are ratings of AAA, BBB, A, AA, and Others at 68.92%, 15.38%, 11.16%, 2.92%, and 1.63%. The fund is less weighted towards Below B (0.0%), B (0.0%), and BB (0.0%) rated bonds.
|The Home Depot Inc||8.74%|
|Nike Inc B||4.45%|
|Lowe’s Companies Inc||3.58%|
|Booking Holdings Inc||2.35%|
|TJX Companies Inc||2.12%|
XLY’s Top Holdings are Amazon.com Inc, Tesla Inc, The Home Depot Inc, McDonald’s Corp, and Nike Inc B at 22.9%, 13.5%, 8.74%, 4.5%, and 4.45%.
Lowe’s Companies Inc (3.58%), Starbucks Corp (3.44%), and Target Corp (3.12%) have a slightly smaller but still significant weight. Booking Holdings Inc and TJX Companies Inc are also represented in the XLY’s holdings at 2.35% and 2.12%.
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The iShares Core U.S. Aggregate Bond ETF (AGG) has a Sharpe Ratio of 0.9 with a Alpha of -0.08 and a Treynor Ratio of 2.7. Its R-squared is 99.96 while AGG’s Standard Deviation is 3.03. Furthermore, the fund has a Beta of 1.01 and a Mean Return of 0.28.
The Consumer Discretionary Select Sector SPDR Fund (XLY) has a R-squared of 80.84 with a Alpha of 6.96 and a Standard Deviation of 15.97. Its Treynor Ratio is 16.69 while XLY’s Beta is 1.02. Furthermore, the fund has a Mean Return of 1.47 and a Sharpe Ratio of 1.06.
AGG’s Mean Return is 1.19 points lower than that of XLY and its R-squared is 19.12 points higher. With a Standard Deviation of 3.03, AGG is slightly less volatile than XLY. The Alpha and Beta of AGG are 7.04 points lower and 0.01 points lower than XLY’s Alpha and Beta.
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AGG had its best year in 2019 with an annual return of 8.68%. AGG’s worst year over the past decade yielded -2.15% and occurred in 2013. In most years the iShares Core U.S. Aggregate Bond ETF provided moderate returns such as in 2017, 2012, and 2014 where annual returns amounted to 3.53%, 4.04%, and 6.04% respectively.
The year 2013 was the strongest year for XLY, returning 42.74% on an annual basis. The poorest year for XLY in the last ten years was 2018, with a yield of 1.66%. Most years the Consumer Discretionary Select Sector SPDR Fund has given investors modest returns, such as in 2015, 2017, and 2012, when gains were 9.93%, 22.77%, and 23.6% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in AGG would have resulted in a final balance of $15,368. This is a profit of $5,368 over 11 years and amounts to a compound annual growth rate (CAGR) of 4.04%.
With a $10,000 investment in XLY, the end total would have been $63,066. This equates to a $53,066 profit over 11 years and a compound annual growth rate (CAGR) of 18.86%.
AGG’s CAGR is 14.82 percentage points lower than that of XLY and as a result, would have yielded $47,698 less on a $10,000 investment. Thus, AGG performed worse than XLY by 14.82% annually.
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