IEFA vs. XLY: What’s The Difference?

The iShares Core MSCI EAFE ETF (IEFA) and the Consumer Discretionary Select Sector SPDR Fund (XLY) are both among the Top 100 ETFs. IEFA is a iShares Foreign Large Blend fund and XLY is a SPDR State Street Global Advisors Consumer Cyclical fund. So, what’s the difference between IEFA and XLY? And which fund is better?

The expense ratio of IEFA is 0.05 percentage points lower than XLY’s (0.07% vs. 0.12%). IEFA also has a higher exposure to the industrials sector and a lower standard deviation. Overall, IEFA has provided lower returns than XLY over the past ten years.

In this article, we’ll compare IEFA vs. XLY. We’ll look at performance and annual returns, as well as at their holdings and risk metrics. Moreover, I’ll also discuss IEFA’s and XLY’s portfolio growth, industry exposure, and fund composition and examine how these affect their overall returns.

Summary

IEFA XLY
Name iShares Core MSCI EAFE ETF Consumer Discretionary Select Sector SPDR Fund
Category Foreign Large Blend Consumer Cyclical
Issuer iShares SPDR State Street Global Advisors
AUM 95.78B 20.21B
Avg. Return 5.79% 18.86%
Div. Yield 2.28% 0.63%
Expense Ratio 0.07% 0.12%

The iShares Core MSCI EAFE ETF (IEFA) is a Foreign Large Blend fund that is issued by iShares. It currently has 95.78B total assets under management and has yielded an average annual return of 5.79% over the past 10 years. The fund has a dividend yield of 2.28% with an expense ratio of 0.07%.

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%.

IEFA’s dividend yield is 1.65% higher than that of XLY (2.28% vs. 0.63%). Also, IEFA yielded on average 13.08% less per year over the past decade (5.79% vs. 18.86%). The expense ratio of IEFA is 0.05 percentage points lower than XLY’s (0.07% vs. 0.12%).

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Fund Composition

Industry Exposure

IEFA vs. XLY - Industry Exposure

IEFA XLY
Technology 9.81% 0.57%
Industrials 16.32% 0.0%
Energy 3.19% 0.0%
Communication Services 5.53% 0.0%
Utilities 3.25% 0.0%
Healthcare 12.01% 0.0%
Consumer Defensive 9.78% 5.34%
Real Estate 4.31% 0.0%
Financial Services 15.91% 0.0%
Consumer Cyclical 11.96% 94.1%
Basic Materials 7.93% 0.0%

The iShares Core MSCI EAFE ETF (IEFA) has the most exposure to the Industrials sector at 16.32%. This is followed by Financial Services and Healthcare at 15.91% and 12.01% respectively. Utilities (3.25%), Real Estate (4.31%), and Communication Services (5.53%) only make up 13.09% of the fund’s total assets.

IEFA’s mid-section with moderate exposure is comprised of Basic Materials, Consumer Defensive, Technology, Consumer Cyclical, and Healthcare stocks at 7.93%, 9.78%, 9.81%, 11.96%, and 12.01%.

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%.

IEFA is 16.32% more exposed to the Industrials sector than XLY (16.32% vs 0.0%). IEFA’s exposure to Financial Services and Healthcare stocks is 15.91% higher and 12.01% higher respectively (15.91% vs. 0.0% and 12.01% vs. 0.0%). In total, Utilities, Real Estate, and Communication Services also make up 13.09% more of the fund’s holdings compared to XLY (13.09% vs. 0.00%).

Holdings

IEFA - Holdings

IEFA Holdings Weight
Nestle SA 1.77%
ASML Holding NV 1.43%
Roche Holding AG 1.31%
LVMH Moet Hennessy Louis Vuitton SE 1.08%
Novartis AG 1.0%
Toyota Motor Corp 0.92%
AstraZeneca PLC 0.78%
Unilever PLC 0.76%
AIA Group Ltd 0.74%
SAP SE 0.73%

IEFA’s Top Holdings are Nestle SA, ASML Holding NV, Roche Holding AG, LVMH Moet Hennessy Louis Vuitton SE, and Novartis AG at 1.77%, 1.43%, 1.31%, 1.08%, and 1.0%.

Toyota Motor Corp (0.92%), AstraZeneca PLC (0.78%), and Unilever PLC (0.76%) have a slightly smaller but still significant weight. AIA Group Ltd and SAP SE are also represented in the IEFA’s holdings at 0.74% and 0.73%.

XLY - Holdings

XLY Holdings Weight
Amazon.com Inc 22.9%
Tesla Inc 13.5%
The Home Depot Inc 8.74%
McDonald’s Corp 4.5%
Nike Inc B 4.45%
Lowe’s Companies Inc 3.58%
Starbucks Corp 3.44%
Target Corp 3.12%
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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Performance

Annual Returns

IEFA vs. XLY - Annual Returns

Year IEFA XLY
2020 8.55% 29.66%
2019 22.67% 28.43%
2018 -14.2% 1.66%
2017 26.42% 22.77%
2016 1.36% 5.87%
2015 0.53% 9.93%
2014 -4.82% 9.49%
2013 23.73% 42.74%
2012 0.0% 23.6%
2011 0.0% 5.98%
2010 0.0% 27.36%

IEFA had its best year in 2017 with an annual return of 26.42%. IEFA’s worst year over the past decade yielded -14.2% and occurred in 2018. In most years the iShares Core MSCI EAFE ETF provided moderate returns such as in 2010, 2015, and 2016 where annual returns amounted to 0.0%, 0.53%, and 1.36% 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.

Portfolio Growth

IEFA vs. XLY - Portfolio Growth

Fund Initial Balance Final Balance CAGR
IEFA $10,000 $14,008 5.79%
XLY $10,000 $26,483 18.86%

A $10,000 investment in IEFA would have resulted in a final balance of $14,008. This is a profit of $4,008 over 7 years and amounts to a compound annual growth rate (CAGR) of 5.79%.

With a $10,000 investment in XLY, the end total would have been $26,483. This equates to a $16,483 profit over 7 years and a compound annual growth rate (CAGR) of 18.86%.

IEFA’s CAGR is 13.08 percentage points lower than that of XLY and as a result, would have yielded $12,475 less on a $10,000 investment. Thus, IEFA performed worse than XLY by 13.08% annually.


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