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IWM vs. XLC: What’s The Difference?

The iShares Russell 2000 ETF (IWM) and the Communication Services Select Sector SPDR Fund (XLC) are both among the Top 100 ETFs. IWM is a iShares Small Blend fund and XLC is a SPDR State Street Global Advisors Communications fund. So, what’s the difference between IWM and XLC? And which fund is better?

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

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

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Summary

IWMXLC
NameiShares Russell 2000 ETFCommunication Services Select Sector SPDR Fund
CategorySmall BlendCommunications
IssueriSharesSPDR State Street Global Advisors
AUM66.48B14.09B
Avg. Return13.52%29.04%
Div. Yield0.86%0.62%
Expense Ratio0.19%0.12%

The iShares Russell 2000 ETF (IWM) is a Small Blend fund that is issued by iShares. It currently has 66.48B total assets under management and has yielded an average annual return of 13.52% over the past 10 years. The fund has a dividend yield of 0.86% with an expense ratio of 0.19%.

The Communication Services Select Sector SPDR Fund (XLC) is a Communications fund that is issued by SPDR State Street Global Advisors. It currently has 14.09B total assets under management and has yielded an average annual return of 29.04% over the past 10 years. The fund has a dividend yield of 0.62% with an expense ratio of 0.12%.

IWM’s dividend yield is 0.24% higher than that of XLC (0.86% vs. 0.62%). Also, IWM yielded on average 15.51% less per year over the past decade (13.52% vs. 29.04%). The expense ratio of IWM is 0.07 percentage points higher than XLC’s (0.19% vs. 0.12%).

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Fund Composition

Industry Exposure

IWM vs. XLC - Industry Exposure

IWMXLC
Technology14.21%0.0%
Industrials14.78%0.0%
Energy3.74%0.0%
Communication Services3.79%100.0%
Utilities2.44%0.0%
Healthcare20.3%0.0%
Consumer Defensive3.65%0.0%
Real Estate8.59%0.0%
Financial Services13.76%0.0%
Consumer Cyclical10.99%0.0%
Basic Materials3.74%0.0%

The iShares Russell 2000 ETF (IWM) has the most exposure to the Healthcare sector at 20.3%. This is followed by Industrials and Technology at 14.78% and 14.21% respectively. Consumer Defensive (3.65%), Basic Materials (3.74%), and Energy (3.74%) only make up 11.13% of the fund’s total assets.

IWM’s mid-section with moderate exposure is comprised of Communication Services, Real Estate, Consumer Cyclical, Financial Services, and Technology stocks at 3.79%, 8.59%, 10.99%, 13.76%, and 14.21%.

The Communication Services Select Sector SPDR Fund (XLC) has the most exposure to the Communication Services sector at 100.0%. This is followed by Technology and Industrials at 0.0% and 0.0% respectively. Consumer Cyclical (0.0%), Financial Services (0.0%), and Real Estate (0.0%) only make up 0.00% of the fund’s total assets.

XLC’s mid-section with moderate exposure is comprised of Consumer Defensive, Healthcare, Utilities, Energy, and Industrials stocks at 0.0%, 0.0%, 0.0%, 0.0%, and 0.0%.

IWM is 20.30% more exposed to the Healthcare sector than XLC (20.3% vs 0.0%). IWM’s exposure to Industrials and Technology stocks is 14.78% higher and 14.21% higher respectively (14.78% vs. 0.0% and 14.21% vs. 0.0%). In total, Consumer Defensive, Basic Materials, and Energy also make up 11.13% more of the fund’s holdings compared to XLC (11.13% vs. 0.00%).

Holdings

IWM - Holdings

IWM HoldingsWeight
AMC Entertainment Holdings Inc Class A0.52%
Intellia Therapeutics Inc0.33%
Crocs Inc0.3%
BlackRock Cash Funds Treasury SL Agency0.29%
Tenet Healthcare Corp0.26%
Lattice Semiconductor Corp0.26%
Tetra Tech Inc0.25%
II-VI Inc0.25%
EastGroup Properties Inc0.24%
Arrowhead Pharmaceuticals Inc0.24%

IWM’s Top Holdings are AMC Entertainment Holdings Inc Class A, Intellia Therapeutics Inc, Crocs Inc, BlackRock Cash Funds Treasury SL Agency, and Tenet Healthcare Corp at 0.52%, 0.33%, 0.3%, 0.29%, and 0.26%.

Lattice Semiconductor Corp (0.26%), Tetra Tech Inc (0.25%), and II-VI Inc (0.25%) have a slightly smaller but still significant weight. EastGroup Properties Inc and Arrowhead Pharmaceuticals Inc are also represented in the IWM’s holdings at 0.24% and 0.24%.

XLC - Holdings

XLC HoldingsWeight
Facebook Inc A23.75%
Alphabet Inc A11.49%
Alphabet Inc Class C11.16%
Netflix Inc4.78%
Charter Communications Inc A4.65%
Comcast Corp Class A4.44%
T-Mobile US Inc4.41%
The Walt Disney Co4.39%
AT&T Inc4.35%
Verizon Communications Inc4.33%

XLC’s Top Holdings are Facebook Inc A, Alphabet Inc A, Alphabet Inc Class C, Netflix Inc, and Charter Communications Inc A at 23.75%, 11.49%, 11.16%, 4.78%, and 4.65%.

Comcast Corp Class A (4.44%), T-Mobile US Inc (4.41%), and The Walt Disney Co (4.39%) have a slightly smaller but still significant weight. AT&T Inc and Verizon Communications Inc are also represented in the XLC’s holdings at 4.35% and 4.33%.

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Risk Analysis

IWMXLC
Mean Return1.120
R-squared77.730
Std. Deviation18.870
Alpha-5.120
Beta1.230
Sharpe Ratio0.680
Treynor Ratio9.560

The iShares Russell 2000 ETF (IWM) has a R-squared of 77.73 with a Mean Return of 1.12 and a Treynor Ratio of 9.56. Its Sharpe Ratio is 0.68 while IWM’s Standard Deviation is 18.87. Furthermore, the fund has a Beta of 1.23 and a Alpha of -5.12.

The Communication Services Select Sector SPDR Fund (XLC) has a R-squared of 0 with a Treynor Ratio of 0 and a Mean Return of 0. Its Standard Deviation is 0 while XLC’s Alpha is 0. Furthermore, the fund has a Beta of 0 and a Sharpe Ratio of 0.

IWM’s Mean Return is 1.12 points higher than that of XLC and its R-squared is 77.73 points higher. With a Standard Deviation of 18.87, IWM is slightly more volatile than XLC. The Alpha and Beta of IWM are 5.12 points lower and 1.23 points higher than XLC’s Alpha and Beta.

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Performance

Annual Returns

IWM vs. XLC - Annual Returns

YearIWMXLC
202019.89%26.85%
201925.42%31.22%
2018-11.02%0.0%
201714.66%0.0%
201621.36%0.0%
2015-4.33%0.0%
20144.94%0.0%
201338.85%0.0%
201216.39%0.0%
2011-4.19%0.0%
201026.76%0.0%

IWM had its best year in 2013 with an annual return of 38.85%. IWM’s worst year over the past decade yielded -11.02% and occurred in 2018. In most years the iShares Russell 2000 ETF provided moderate returns such as in 2017, 2012, and 2020 where annual returns amounted to 14.66%, 16.39%, and 19.89% respectively.

The year 2019 was the strongest year for XLC, returning 31.22% on an annual basis. The poorest year for XLC in the last ten years was 2018, with a yield of 0.0%. Most years the Communication Services Select Sector SPDR Fund has given investors modest returns, such as in 2014, 2013, and 2012, when gains were 0.0%, 0.0%, and 0.0% respectively.

Portfolio Growth

IWM vs. XLC - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
IWM$10,000$15,03613.52%
XLC$10,000$16,64529.04%

A $10,000 investment in IWM would have resulted in a final balance of $15,036. This is a profit of $5,036 over 2 years and amounts to a compound annual growth rate (CAGR) of 13.52%.

With a $10,000 investment in XLC, the end total would have been $16,645. This equates to a $6,645 profit over 2 years and a compound annual growth rate (CAGR) of 29.04%.

IWM’s CAGR is 15.51 percentage points lower than that of XLC and as a result, would have yielded $1,609 less on a $10,000 investment. Thus, IWM performed worse than XLC by 15.51% annually.


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