MUB vs. XLY: What’s The Difference?

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

The expense ratio of MUB is 0.05 percentage points lower than XLY’s (0.07% vs. 0.12%). MUB is mostly comprised of AA bonds while XLY has a high exposure to the consumer cyclical sector. Overall, MUB has provided lower returns than XLY over the past 11 years.

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

Summary

MUB XLY
Name iShares National Muni Bond ETF Consumer Discretionary Select Sector SPDR Fund
Category Muni National Interm Consumer Cyclical
Issuer iShares SPDR State Street Global Advisors
AUM 22.71B 20.21B
Avg. Return 4.04% 18.86%
Div. Yield 1.96% 0.63%
Expense Ratio 0.07% 0.12%

The iShares National Muni Bond ETF (MUB) is a Muni National Interm fund that is issued by iShares. It currently has 22.71B total assets under management and has yielded an average annual return of 4.04% over the past 10 years. The fund has a dividend yield of 1.96% with an expense ratio of 0.07%.

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%.

MUB’s dividend yield is 1.33% higher than that of XLY (1.96% vs. 0.63%). Also, MUB yielded on average 14.83% less per year over the past decade (4.04% vs. 18.86%). The expense ratio of MUB is 0.05 percentage points lower than XLY’s (0.07% vs. 0.12%).

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Fund Composition

Holdings

MUB - Holdings

MUB Bond Sectors Weight
AA 60.38%
AAA 18.39%
A 15.04%
BBB 6.0%
Others 0.17%
BB 0.02%
Below B 0.0%
B 0.0%
US Government 0.0%

MUB’s Top Bond Sectors are ratings of AA, AAA, A, BBB, and Others at 60.38%, 18.39%, 15.04%, 6.0%, and 0.17%. The fund is less weighted towards BB (0.02%), Below B (0.0%), and B (0.0%) rated bonds.

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%.

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Risk Analysis

MUB XLY
Mean Return 0.32 1.47
R-squared 99 80.84
Std. Deviation 3.68 15.97
Alpha -0.46 6.96
Beta 1.01 1.02
Sharpe Ratio 0.88 1.06
Treynor Ratio 3.2 16.69

The iShares National Muni Bond ETF (MUB) has a Mean Return of 0.32 with a Beta of 1.01 and a Sharpe Ratio of 0.88. Its R-squared is 99 while MUB’s Treynor Ratio is 3.2. Furthermore, the fund has a Standard Deviation of 3.68 and a Alpha of -0.46.

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

MUB’s Mean Return is 1.15 points lower than that of XLY and its R-squared is 18.16 points higher. With a Standard Deviation of 3.68, MUB is slightly less volatile than XLY. The Alpha and Beta of MUB are 7.42 points lower and 0.01 points lower than XLY’s Alpha and Beta.

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Performance

Annual Returns

MUB vs. XLY - Annual Returns

Year MUB XLY
2020 4.87% 29.66%
2019 7.28% 28.43%
2018 0.86% 1.66%
2017 4.61% 22.77%
2016 0.06% 5.87%
2015 2.99% 9.93%
2014 8.61% 9.49%
2013 -3.26% 42.74%
2012 6.14% 23.6%
2011 10.85% 5.98%
2010 1.4% 27.36%

MUB had its best year in 2011 with an annual return of 10.85%. MUB’s worst year over the past decade yielded -3.26% and occurred in 2013. In most years the iShares National Muni Bond ETF provided moderate returns such as in 2015, 2017, and 2020 where annual returns amounted to 2.99%, 4.61%, and 4.87% 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

MUB vs. XLY - Portfolio Growth

Fund Initial Balance Final Balance CAGR
MUB $10,000 $15,333 4.04%
XLY $10,000 $63,066 18.86%

A $10,000 investment in MUB would have resulted in a final balance of $15,333. This is a profit of $5,333 over 11 years and amounts to a compound annual growth rate (CAGR) of 4.04%.

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%.

MUB’s CAGR is 14.83 percentage points lower than that of XLY and as a result, would have yielded $47,733 less on a $10,000 investment. Thus, MUB performed worse than XLY by 14.83% annually.


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