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IWM vs. XLI: What’s The Difference?

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

The expense ratio of IWM is 0.07 percentage points higher than XLI’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 XLI over the past ten years.

In this article, we’ll compare IWM vs. XLI. 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 XLI’s industry exposure, holdings, and annual returns and examine how these affect their overall returns.

Introduction To Mutual Funds
Introduction To Mutual Funds
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Summary

IWMXLI
NameiShares Russell 2000 ETFIndustrial Select Sector SPDR Fund
CategorySmall BlendIndustrials
IssueriSharesSPDR State Street Global Advisors
AUM66.48B19.33B
Avg. Return13.52%14.44%
Div. Yield0.86%1.25%
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 Industrial Select Sector SPDR Fund (XLI) is a Industrials fund that is issued by SPDR State Street Global Advisors. It currently has 19.33B total assets under management and has yielded an average annual return of 14.44% over the past 10 years. The fund has a dividend yield of 1.25% with an expense ratio of 0.12%.

IWM’s dividend yield is 0.39% lower than that of XLI (0.86% vs. 1.25%). Also, IWM yielded on average 0.92% less per year over the past decade (13.52% vs. 14.44%). The expense ratio of IWM is 0.07 percentage points higher than XLI’s (0.19% vs. 0.12%).

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Fund Composition

Industry Exposure

IWM vs. XLI - Industry Exposure

IWMXLI
Technology14.21%1.82%
Industrials14.78%97.49%
Energy3.74%0.0%
Communication Services3.79%0.0%
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%0.69%
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 Industrial Select Sector SPDR Fund (XLI) has the most exposure to the Industrials sector at 97.49%. This is followed by Technology and Consumer Cyclical at 1.82% and 0.69% respectively. Financial Services (0.0%), Real Estate (0.0%), and Consumer Defensive (0.0%) only make up 0.00% of the fund’s total assets.

XLI’s mid-section with moderate exposure is comprised of Healthcare, Utilities, Communication Services, Energy, and Consumer Cyclical stocks at 0.0%, 0.0%, 0.0%, 0.0%, and 0.69%.

IWM is 20.30% more exposed to the Healthcare sector than XLI (20.3% vs 0.0%). IWM’s exposure to Industrials and Technology stocks is 82.71% lower and 12.39% higher respectively (14.78% vs. 97.49% and 14.21% vs. 1.82%). In total, Consumer Defensive, Basic Materials, and Energy also make up 11.13% more of the fund’s holdings compared to XLI (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%.

XLI - Holdings

XLI HoldingsWeight
Honeywell International Inc4.9%
United Parcel Service Inc Class B4.84%
Union Pacific Corp4.7%
Boeing Co4.24%
Raytheon Technologies Corp4.16%
Caterpillar Inc3.84%
General Electric Co3.8%
3M Co3.7%
Deere & Co3.54%
Lockheed Martin Corp2.98%

XLI’s Top Holdings are Honeywell International Inc, United Parcel Service Inc Class B, Union Pacific Corp, Boeing Co, and Raytheon Technologies Corp at 4.9%, 4.84%, 4.7%, 4.24%, and 4.16%.

Caterpillar Inc (3.84%), General Electric Co (3.8%), and 3M Co (3.7%) have a slightly smaller but still significant weight. Deere & Co and Lockheed Martin Corp are also represented in the XLI’s holdings at 3.54% and 2.98%.

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Risk Analysis

IWMXLI
Mean Return1.121.14
R-squared77.7378.97
Std. Deviation18.8717.13
Alpha-5.122.38
Beta1.231.08
Sharpe Ratio0.680.76
Treynor Ratio9.5611.34

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

The Industrial Select Sector SPDR Fund (XLI) has a Mean Return of 1.14 with a Standard Deviation of 17.13 and a Treynor Ratio of 11.34. Its Alpha is 2.38 while XLI’s R-squared is 78.97. Furthermore, the fund has a Beta of 1.08 and a Sharpe Ratio of 0.76.

IWM’s Mean Return is 0.02 points lower than that of XLI and its R-squared is 1.24 points lower. With a Standard Deviation of 18.87, IWM is slightly more volatile than XLI. The Alpha and Beta of IWM are 7.50 points lower and 0.15 points higher than XLI’s Alpha and Beta.

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Performance

Annual Returns

IWM vs. XLI - Annual Returns

YearIWMXLI
202019.89%11.0%
201925.42%29.11%
2018-11.02%-13.1%
201714.66%23.85%
201621.36%19.93%
2015-4.33%-4.27%
20144.94%10.44%
201338.85%40.44%
201216.39%14.86%
2011-4.19%-1.01%
201026.76%27.62%

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 2013 was the strongest year for XLI, returning 40.44% on an annual basis. The poorest year for XLI in the last ten years was 2018, with a yield of -13.1%. Most years the Industrial Select Sector SPDR Fund has given investors modest returns, such as in 2020, 2012, and 2016, when gains were 11.0%, 14.86%, and 19.93% respectively.

Portfolio Growth

IWM vs. XLI - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
IWM$10,000$36,68613.52%
XLI$10,000$39,85314.44%

A $10,000 investment in IWM would have resulted in a final balance of $36,686. This is a profit of $26,686 over 11 years and amounts to a compound annual growth rate (CAGR) of 13.52%.

With a $10,000 investment in XLI, the end total would have been $39,853. This equates to a $29,853 profit over 11 years and a compound annual growth rate (CAGR) of 14.44%.

IWM’s CAGR is 0.92 percentage points lower than that of XLI and as a result, would have yielded $3,167 less on a $10,000 investment. Thus, IWM performed worse than XLI by 0.92% annually.


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