IWB vs. XLY: What’s The Difference?

The iShares Russell 1000 ETF (IWB) and the Consumer Discretionary Select Sector SPDR Fund (XLY) are both among the Top 100 ETFs. IWB is a iShares Large Blend fund and XLY is a SPDR State Street Global Advisors Consumer Cyclical fund. So, what’s the difference between IWB and XLY? And which fund is better?

The expense ratio of IWB is 0.03 percentage points higher than XLY’s (0.15% vs. 0.12%). IWB also has a higher exposure to the technology sector and a lower standard deviation. Overall, IWB has provided lower returns than XLY over the past ten years.

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

Summary

IWB XLY
Name iShares Russell 1000 ETF Consumer Discretionary Select Sector SPDR Fund
Category Large Blend Consumer Cyclical
Issuer iShares SPDR State Street Global Advisors
AUM 30.54B 20.21B
Avg. Return 14.64% 18.86%
Div. Yield 1.14% 0.63%
Expense Ratio 0.15% 0.12%

The iShares Russell 1000 ETF (IWB) is a Large Blend fund that is issued by iShares. It currently has 30.54B total assets under management and has yielded an average annual return of 14.64% over the past 10 years. The fund has a dividend yield of 1.14% with an expense ratio of 0.15%.

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%.

IWB’s dividend yield is 0.51% higher than that of XLY (1.14% vs. 0.63%). Also, IWB yielded on average 4.23% less per year over the past decade (14.64% vs. 18.86%). The expense ratio of IWB is 0.03 percentage points higher than XLY’s (0.15% vs. 0.12%).

Fund Composition

Industry Exposure

IWB vs. XLY - Industry Exposure

IWB XLY
Technology 25.33% 0.57%
Industrials 8.88% 0.0%
Energy 2.44% 0.0%
Communication Services 10.83% 0.0%
Utilities 2.36% 0.0%
Healthcare 13.35% 0.0%
Consumer Defensive 5.97% 5.34%
Real Estate 3.34% 0.0%
Financial Services 13.64% 0.0%
Consumer Cyclical 11.85% 94.1%
Basic Materials 2.02% 0.0%

The iShares Russell 1000 ETF (IWB) has the most exposure to the Technology sector at 25.33%. This is followed by Financial Services and Healthcare at 13.64% and 13.35% respectively. Utilities (2.36%), Energy (2.44%), and Real Estate (3.34%) only make up 8.14% of the fund’s total assets.

IWB’s mid-section with moderate exposure is comprised of Consumer Defensive, Industrials, Communication Services, Consumer Cyclical, and Healthcare stocks at 5.97%, 8.88%, 10.83%, 11.85%, and 13.35%.

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%.

IWB is 24.76% more exposed to the Technology sector than XLY (25.33% vs 0.57%). IWB’s exposure to Financial Services and Healthcare stocks is 13.64% higher and 13.35% higher respectively (13.64% vs. 0.0% and 13.35% vs. 0.0%). In total, Utilities, Energy, and Real Estate also make up 8.14% more of the fund’s holdings compared to XLY (8.14% vs. 0.00%).

Holdings

IWB - Holdings

IWB Holdings Weight
Apple Inc 5.45%
Microsoft Corp 5.11%
Amazon.com Inc 3.43%
Facebook Inc Class A 2.03%
Alphabet Inc Class A 1.93%
Alphabet Inc Class C 1.82%
Tesla Inc 1.27%
Berkshire Hathaway Inc Class B 1.24%
NVIDIA Corp 1.11%
JPMorgan Chase & Co 1.09%

IWB’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc Class A, and Alphabet Inc Class A at 5.45%, 5.11%, 3.43%, 2.03%, and 1.93%.

Alphabet Inc Class C (1.82%), Tesla Inc (1.27%), and Berkshire Hathaway Inc Class B (1.24%) have a slightly smaller but still significant weight. NVIDIA Corp and JPMorgan Chase & Co are also represented in the IWB’s holdings at 1.11% and 1.09%.

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%.

Risk Analysis

IWB XLY
Mean Return 1.27 1.47
R-squared 99.73 80.84
Std. Deviation 13.87 15.97
Alpha -0.38 6.96
Beta 1.02 1.02
Sharpe Ratio 1.05 1.06
Treynor Ratio 14.31 16.69

The iShares Russell 1000 ETF (IWB) has a Treynor Ratio of 14.31 with a Alpha of -0.38 and a Standard Deviation of 13.87. Its R-squared is 99.73 while IWB’s Sharpe Ratio is 1.05. Furthermore, the fund has a Beta of 1.02 and a Mean Return of 1.27.

The Consumer Discretionary Select Sector SPDR Fund (XLY) has a Sharpe Ratio of 1.06 with a Alpha of 6.96 and a Mean Return of 1.47. Its Beta is 1.02 while XLY’s Standard Deviation is 15.97. Furthermore, the fund has a R-squared of 80.84 and a Treynor Ratio of 16.69.

IWB’s Mean Return is 0.20 points lower than that of XLY and its R-squared is 18.89 points higher. With a Standard Deviation of 13.87, IWB is slightly less volatile than XLY. The Alpha and Beta of IWB are 7.34 points lower and 0.00 points lower than XLY’s Alpha and Beta.

Performance

Annual Returns

IWB vs. XLY - Annual Returns

Year IWB XLY
2020 20.8% 29.66%
2019 31.26% 28.43%
2018 -4.91% 1.66%
2017 21.53% 22.77%
2016 11.91% 5.87%
2015 0.82% 9.93%
2014 13.08% 9.49%
2013 32.93% 42.74%
2012 16.27% 23.6%
2011 1.36% 5.98%
2010 15.94% 27.36%

IWB had its best year in 2013 with an annual return of 32.93%. IWB’s worst year over the past decade yielded -4.91% and occurred in 2018. In most years the iShares Russell 1000 ETF provided moderate returns such as in 2014, 2010, and 2012 where annual returns amounted to 13.08%, 15.94%, and 16.27% 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

IWB vs. XLY - Portfolio Growth

Fund Initial Balance Final Balance CAGR
IWB $10,000 $42,462 14.64%
XLY $10,000 $63,066 18.86%

A $10,000 investment in IWB would have resulted in a final balance of $42,462. This is a profit of $32,462 over 11 years and amounts to a compound annual growth rate (CAGR) of 14.64%.

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%.

IWB’s CAGR is 4.23 percentage points lower than that of XLY and as a result, would have yielded $20,604 less on a $10,000 investment. Thus, IWB performed worse than XLY by 4.23% annually.


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