The iShares MSCI Emerging Markets ETF (EEM) and the Consumer Discretionary Select Sector SPDR Fund (XLY) are both among the Top 100 ETFs. EEM is a iShares Diversified Emerging Mkts fund and XLY is a SPDR State Street Global Advisors Consumer Cyclical fund. So, what’s the difference between EEM and XLY? And which fund is better?
The expense ratio of EEM is 0.56 percentage points higher than XLY’s (0.68% vs. 0.12%). EEM also has a higher exposure to the technology sector and a higher standard deviation. Overall, EEM has provided lower returns than XLY over the past ten years.
In this article, we’ll compare EEM vs. XLY. We’ll look at portfolio growth and performance, as well as at their industry exposure and fund composition. Moreover, I’ll also discuss EEM’s and XLY’s holdings, annual returns, and risk metrics and examine how these affect their overall returns.
|Name||iShares MSCI Emerging Markets ETF||Consumer Discretionary Select Sector SPDR Fund|
|Category||Diversified Emerging Mkts||Consumer Cyclical|
|Issuer||iShares||SPDR State Street Global Advisors|
The iShares MSCI Emerging Markets ETF (EEM) is a Diversified Emerging Mkts fund that is issued by iShares. It currently has 30.33B total assets under management and has yielded an average annual return of 5.47% over the past 10 years. The fund has a dividend yield of 1.48% with an expense ratio of 0.68%.
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%.
EEM’s dividend yield is 0.85% higher than that of XLY (1.48% vs. 0.63%). Also, EEM yielded on average 13.39% less per year over the past decade (5.47% vs. 18.86%). The expense ratio of EEM is 0.56 percentage points higher than XLY’s (0.68% vs. 0.12%).
The iShares MSCI Emerging Markets ETF (EEM) has the most exposure to the Technology sector at 21.36%. This is followed by Financial Services and Consumer Cyclical at 18.39% and 15.16% respectively. Utilities (1.99%), Industrials (4.61%), and Healthcare (5.06%) only make up 11.66% of the fund’s total assets.
EEM’s mid-section with moderate exposure is comprised of Energy, Consumer Defensive, Basic Materials, Communication Services, and Consumer Cyclical stocks at 5.17%, 5.45%, 9.07%, 11.76%, and 15.16%.
The Consumer Discretionary Select Sector SPDR Fund (XLY) has the most exposure to the Consumer Cyclical sector at 94.1%. This is followed by Consumer Defensive and Technology at 5.34% and 0.57% respectively. Financial Services (0.0%), Real Estate (0.0%), and Healthcare (0.0%) only make up 0.00% of the fund’s total assets.
XLY’s mid-section with moderate exposure is comprised of Utilities, Communication Services, Energy, Industrials, and Technology stocks at 0.0%, 0.0%, 0.0%, 0.0%, and 0.57%.
EEM is 20.79% more exposed to the Technology sector than XLY (21.36% vs 0.57%). EEM’s exposure to Financial Services and Consumer Cyclical stocks is 18.39% higher and 78.94% lower respectively (18.39% vs. 0.0% and 15.16% vs. 94.1%). In total, Utilities, Industrials, and Healthcare also make up 11.66% more of the fund’s holdings compared to XLY (11.66% vs. 0.00%).
|Taiwan Semiconductor Manufacturing Co Ltd||6.36%|
|Alibaba Group Holding Ltd Ordinary Shares||4.58%|
|Tencent Holdings Ltd||4.41%|
|Samsung Electronics Co Ltd||4.05%|
|Naspers Ltd Class N||1.04%|
|Reliance Industries Ltd Shs Dematerialised||0.97%|
|China Construction Bank Corp Class H||0.83%|
EEM’s Top Holdings are Taiwan Semiconductor Manufacturing Co Ltd, Alibaba Group Holding Ltd Ordinary Shares, Tencent Holdings Ltd, Samsung Electronics Co Ltd, and Meituan at 6.36%, 4.58%, 4.41%, 4.05%, and 1.24%.
Vale SA (1.04%), Naspers Ltd Class N (1.04%), and Reliance Industries Ltd Shs Dematerialised (0.97%) have a slightly smaller but still significant weight. Infosys Ltd and China Construction Bank Corp Class H are also represented in the EEM’s holdings at 0.92% and 0.83%.
|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%.
The iShares MSCI Emerging Markets ETF (EEM) has a Treynor Ratio of 2.22 with a Mean Return of 0.38 and a Sharpe Ratio of 0.22. Its Beta is 1.08 while EEM’s Standard Deviation is 17.79. Furthermore, the fund has a Alpha of -2.33 and a R-squared of 83.5.
The Consumer Discretionary Select Sector SPDR Fund (XLY) has a Beta of 1.02 with a Standard Deviation of 15.97 and a Treynor Ratio of 16.69. Its Sharpe Ratio is 1.06 while XLY’s Alpha is 6.96. Furthermore, the fund has a R-squared of 80.84 and a Mean Return of 1.47.
EEM’s Mean Return is 1.09 points lower than that of XLY and its R-squared is 2.66 points higher. With a Standard Deviation of 17.79, EEM is slightly more volatile than XLY. The Alpha and Beta of EEM are 9.29 points lower and 0.06 points higher than XLY’s Alpha and Beta.
EEM had its best year in 2017 with an annual return of 36.42%. EEM’s worst year over the past decade yielded -18.87% and occurred in 2011. In most years the iShares MSCI Emerging Markets ETF provided moderate returns such as in 2014, 2016, and 2010 where annual returns amounted to -2.82%, 10.51%, and 15.93% 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 EEM would have resulted in a final balance of $15,578. This is a profit of $5,578 over 11 years and amounts to a compound annual growth rate (CAGR) of 5.47%.
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%.
EEM’s CAGR is 13.39 percentage points lower than that of XLY and as a result, would have yielded $47,488 less on a $10,000 investment. Thus, EEM performed worse than XLY by 13.39% 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.