IWF vs. XLY: What’s The Difference?

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

The expense ratio of IWF is 0.07 percentage points higher than XLY’s (0.19% vs. 0.12%). IWF also has a higher exposure to the technology sector and a lower standard deviation. Overall, IWF has provided lower returns than XLY over the past ten years.

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

Summary

IWF XLY
Name iShares Russell 1000 Growth ETF Consumer Discretionary Select Sector SPDR Fund
Category Large Growth Consumer Cyclical
Issuer iShares SPDR State Street Global Advisors
AUM 72.16B 20.21B
Avg. Return 17.72% 18.86%
Div. Yield 0.52% 0.63%
Expense Ratio 0.19% 0.12%

The iShares Russell 1000 Growth ETF (IWF) is a Large Growth fund that is issued by iShares. It currently has 72.16B total assets under management and has yielded an average annual return of 17.72% over the past 10 years. The fund has a dividend yield of 0.52% with an expense ratio of 0.19%.

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%.

IWF’s dividend yield is 0.11% lower than that of XLY (0.52% vs. 0.63%). Also, IWF yielded on average 1.14% less per year over the past decade (17.72% vs. 18.86%). The expense ratio of IWF is 0.07 percentage points higher than XLY’s (0.19% vs. 0.12%).

FYI: The best way I've found to invest in ETFs is through M1 Finance. It's free and you even get an instant line of credit! Have a look here (link to M1 Finance).

Fund Composition

Industry Exposure

IWF vs. XLY - Industry Exposure

IWF XLY
Technology 39.29% 0.57%
Industrials 6.19% 0.0%
Energy 0.28% 0.0%
Communication Services 12.82% 0.0%
Utilities 0.03% 0.0%
Healthcare 9.23% 0.0%
Consumer Defensive 4.31% 5.34%
Real Estate 1.85% 0.0%
Financial Services 7.36% 0.0%
Consumer Cyclical 17.62% 94.1%
Basic Materials 1.01% 0.0%

The iShares Russell 1000 Growth ETF (IWF) has the most exposure to the Technology sector at 39.29%. This is followed by Consumer Cyclical and Communication Services at 17.62% and 12.82% respectively. Energy (0.28%), Basic Materials (1.01%), and Real Estate (1.85%) only make up 3.14% of the fund’s total assets.

IWF’s mid-section with moderate exposure is comprised of Consumer Defensive, Industrials, Financial Services, Healthcare, and Communication Services stocks at 4.31%, 6.19%, 7.36%, 9.23%, and 12.82%.

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%.

IWF is 38.72% more exposed to the Technology sector than XLY (39.29% vs 0.57%). IWF’s exposure to Consumer Cyclical and Communication Services stocks is 76.48% lower and 12.82% higher respectively (17.62% vs. 94.1% and 12.82% vs. 0.0%). In total, Energy, Basic Materials, and Real Estate also make up 3.14% more of the fund’s holdings compared to XLY (3.14% vs. 0.00%).

Holdings

IWF - Holdings

IWF Holdings Weight
Apple Inc 10.51%
Microsoft Corp 9.85%
Amazon.com Inc 6.63%
Facebook Inc Class A 3.91%
Alphabet Inc Class A 3.2%
Alphabet Inc Class C 3.03%
Tesla Inc 2.45%
NVIDIA Corp 2.14%
Visa Inc Class A 1.91%
The Home Depot Inc 1.62%

IWF’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc Class A, and Alphabet Inc Class A at 10.51%, 9.85%, 6.63%, 3.91%, and 3.2%.

Alphabet Inc Class C (3.03%), Tesla Inc (2.45%), and NVIDIA Corp (2.14%) have a slightly smaller but still significant weight. Visa Inc Class A and The Home Depot Inc are also represented in the IWF’s holdings at 1.91% and 1.62%.

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%.

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).

Risk Analysis

IWF XLY
Mean Return 1.48 1.47
R-squared 92.93 80.84
Std. Deviation 14.42 15.97
Alpha 2.16 6.96
Beta 1.03 1.02
Sharpe Ratio 1.19 1.06
Treynor Ratio 17.1 16.69

The iShares Russell 1000 Growth ETF (IWF) has a Beta of 1.03 with a Alpha of 2.16 and a Standard Deviation of 14.42. Its Treynor Ratio is 17.1 while IWF’s Mean Return is 1.48. Furthermore, the fund has a R-squared of 92.93 and a Sharpe Ratio of 1.19.

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

IWF’s Mean Return is 0.01 points higher than that of XLY and its R-squared is 12.09 points higher. With a Standard Deviation of 14.42, IWF is slightly less volatile than XLY. The Alpha and Beta of IWF are 4.80 points lower and 0.01 points higher than XLY’s Alpha and Beta.

BTW: Uncorrelated crypto assets such as Bitcoin can serve as a hedge and mitigate risk. I've allocated around 5% of my portfolio to crypto assets through Coinbase - the simplest and cheapest broker I've found! Click here to read more (link to Coinbase).

Performance

Annual Returns

IWF vs. XLY - Annual Returns

Year IWF XLY
2020 38.21% 29.66%
2019 36.08% 28.43%
2018 -1.68% 1.66%
2017 29.96% 22.77%
2016 6.92% 5.87%
2015 5.48% 9.93%
2014 12.84% 9.49%
2013 33.19% 42.74%
2012 15.03% 23.6%
2011 2.47% 5.98%
2010 16.47% 27.36%

IWF had its best year in 2020 with an annual return of 38.21%. IWF’s worst year over the past decade yielded -1.68% and occurred in 2018. In most years the iShares Russell 1000 Growth ETF provided moderate returns such as in 2014, 2012, and 2010 where annual returns amounted to 12.84%, 15.03%, and 16.47% 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

IWF vs. XLY - Portfolio Growth

Fund Initial Balance Final Balance CAGR
IWF $10,000 $55,920 17.72%
XLY $10,000 $63,066 18.86%

A $10,000 investment in IWF would have resulted in a final balance of $55,920. This is a profit of $45,920 over 11 years and amounts to a compound annual growth rate (CAGR) of 17.72%.

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%.

IWF’s CAGR is 1.14 percentage points lower than that of XLY and as a result, would have yielded $7,146 less on a $10,000 investment. Thus, IWF performed worse than XLY by 1.14% 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) 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!

2) 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!).

3) If you are interested in crypto, check out Coinbase. I've started allocating a small amount of assets to the growing crypto space and Coinbase has just been a breeze to use. Once you register, make sure to also open an Coinbase Pro account to buy crypto at the lowest fees on the market (just 0.1%!).

To see all of my most up-to-date recommendations, check out the Recommended Tools section.

Leave a Reply