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.
FYI: Another great way to get exposure to the real estate sector is by investing in real estate debt. Groundfloor offers fantastic short-term, high-yield bonds that can add diversification to your portfolio!
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%).
FYI: The best way I've found to invest is through M1 Finance. It's free and you even get an instant line of credit and 100$! Have a look here (link to M1 Finance).
Fund Composition
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 | 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 | 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.
NOTE: The easiest way to add diversification to your portfolio is to invest in real estate through Fundrise. You can become private real estate investor without the burden of property management! Check it out here (link to Fundrise).
Performance
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
| 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.
Current recommendations:
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.
I believe that money is just a means to an end: to be free to spend your time as you wish, to maximize your positive impact on the world.
