The iShares Russell 2000 ETF (IWM) and the Consumer Discretionary Select Sector SPDR Fund (XLY) are both among the Top 100 ETFs. IWM is a iShares Small Blend fund and XLY is a SPDR State Street Global Advisors Consumer Cyclical fund. So, what’s the difference between IWM and XLY? And which fund is better?
The expense ratio of IWM is 0.07 percentage points higher than XLY’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 XLY over the past ten years.
In this article, we’ll compare IWM vs. XLY. We’ll look at risk metrics and fund composition, as well as at their performance and holdings. Moreover, I’ll also discuss IWM’s and XLY’s portfolio growth, annual returns, and industry exposure and examine how these affect their overall returns.
Summary
| IWM | XLY | |
| Name | iShares Russell 2000 ETF | Consumer Discretionary Select Sector SPDR Fund |
| Category | Small Blend | Consumer Cyclical |
| Issuer | iShares | SPDR State Street Global Advisors |
| AUM | 66.48B | 20.21B |
| Avg. Return | 13.52% | 18.86% |
| Div. Yield | 0.86% | 0.63% |
| Expense Ratio | 0.19% | 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 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%.
IWM’s dividend yield is 0.23% higher than that of XLY (0.86% vs. 0.63%). Also, IWM yielded on average 5.34% less per year over the past decade (13.52% vs. 18.86%). The expense ratio of IWM is 0.07 percentage points higher than XLY’s (0.19% vs. 0.12%).
Fund Composition
Industry Exposure
| IWM | XLY | |
| Technology | 14.21% | 0.57% |
| Industrials | 14.78% | 0.0% |
| Energy | 3.74% | 0.0% |
| Communication Services | 3.79% | 0.0% |
| Utilities | 2.44% | 0.0% |
| Healthcare | 20.3% | 0.0% |
| Consumer Defensive | 3.65% | 5.34% |
| Real Estate | 8.59% | 0.0% |
| Financial Services | 13.76% | 0.0% |
| Consumer Cyclical | 10.99% | 94.1% |
| Basic Materials | 3.74% | 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 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%.
IWM is 20.30% more exposed to the Healthcare sector than XLY (20.3% vs 0.0%). IWM’s exposure to Industrials and Technology stocks is 14.78% higher and 13.64% higher respectively (14.78% vs. 0.0% and 14.21% vs. 0.57%). In total, Consumer Defensive, Basic Materials, and Energy also make up 5.79% more of the fund’s holdings compared to XLY (11.13% vs. 5.34%).
Holdings
| IWM Holdings | Weight |
| AMC Entertainment Holdings Inc Class A | 0.52% |
| Intellia Therapeutics Inc | 0.33% |
| Crocs Inc | 0.3% |
| BlackRock Cash Funds Treasury SL Agency | 0.29% |
| Tenet Healthcare Corp | 0.26% |
| Lattice Semiconductor Corp | 0.26% |
| Tetra Tech Inc | 0.25% |
| II-VI Inc | 0.25% |
| EastGroup Properties Inc | 0.24% |
| Arrowhead Pharmaceuticals Inc | 0.24% |
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%.
| 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
| IWM | XLY | |
| Mean Return | 1.12 | 1.47 |
| R-squared | 77.73 | 80.84 |
| Std. Deviation | 18.87 | 15.97 |
| Alpha | -5.12 | 6.96 |
| Beta | 1.23 | 1.02 |
| Sharpe Ratio | 0.68 | 1.06 |
| Treynor Ratio | 9.56 | 16.69 |
The iShares Russell 2000 ETF (IWM) has a Mean Return of 1.12 with a R-squared of 77.73 and a Beta of 1.23. Its Alpha is -5.12 while IWM’s Sharpe Ratio is 0.68. Furthermore, the fund has a Standard Deviation of 18.87 and a Treynor Ratio of 9.56.
The Consumer Discretionary Select Sector SPDR Fund (XLY) has a R-squared of 80.84 with a Standard Deviation of 15.97 and a Mean Return of 1.47. Its Sharpe Ratio is 1.06 while XLY’s Beta is 1.02. Furthermore, the fund has a Alpha of 6.96 and a Treynor Ratio of 16.69.
IWM’s Mean Return is 0.35 points lower than that of XLY and its R-squared is 3.11 points lower. With a Standard Deviation of 18.87, IWM is slightly more volatile than XLY. The Alpha and Beta of IWM are 12.08 points lower and 0.21 points higher than XLY’s Alpha and Beta.
Performance
Annual Returns
| Year | IWM | XLY |
| 2020 | 19.89% | 29.66% |
| 2019 | 25.42% | 28.43% |
| 2018 | -11.02% | 1.66% |
| 2017 | 14.66% | 22.77% |
| 2016 | 21.36% | 5.87% |
| 2015 | -4.33% | 9.93% |
| 2014 | 4.94% | 9.49% |
| 2013 | 38.85% | 42.74% |
| 2012 | 16.39% | 23.6% |
| 2011 | -4.19% | 5.98% |
| 2010 | 26.76% | 27.36% |
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 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 |
| IWM | $10,000 | $36,686 | 13.52% |
| XLY | $10,000 | $63,066 | 18.86% |
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 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%.
IWM’s CAGR is 5.34 percentage points lower than that of XLY and as a result, would have yielded $26,380 less on a $10,000 investment. Thus, IWM performed worse than XLY by 5.34% annually.
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