USMV vs. XLY: What’s The Difference?

The iShares MSCI USA Min Vol Factor ETF (USMV) and the Consumer Discretionary Select Sector SPDR Fund (XLY) are both among the Top 100 ETFs. USMV is a iShares Large Blend fund and XLY is a SPDR State Street Global Advisors Consumer Cyclical fund. So, what’s the difference between USMV and XLY? And which fund is better?

The expense ratio of USMV is 0.03 percentage points higher than XLY’s (0.15% vs. 0.12%). USMV also has a higher exposure to the technology sector and a lower standard deviation. Overall, USMV has provided lower returns than XLY over the past 8 years.

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

Summary

USMV XLY
Name iShares MSCI USA Min Vol Factor ETF Consumer Discretionary Select Sector SPDR Fund
Category Large Blend Consumer Cyclical
Issuer iShares SPDR State Street Global Advisors
AUM 27.6B 20.21B
Avg. Return 13.89% 18.86%
Div. Yield 1.5% 0.63%
Expense Ratio 0.15% 0.12%

The iShares MSCI USA Min Vol Factor ETF (USMV) is a Large Blend fund that is issued by iShares. It currently has 27.6B total assets under management and has yielded an average annual return of 13.89% over the past 10 years. The fund has a dividend yield of 1.5% with an expense ratio of 0.15%.

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%.

USMV’s dividend yield is 0.87% higher than that of XLY (1.5% vs. 0.63%). Also, USMV yielded on average 4.97% less per year over the past decade (13.89% vs. 18.86%). The expense ratio of USMV is 0.03 percentage points higher than XLY’s (0.15% vs. 0.12%).

Fund Composition

Industry Exposure

USMV vs. XLY - Industry Exposure

USMV XLY
Technology 20.53% 0.57%
Industrials 10.51% 0.0%
Energy 0.21% 0.0%
Communication Services 11.03% 0.0%
Utilities 6.93% 0.0%
Healthcare 18.42% 0.0%
Consumer Defensive 12.82% 5.34%
Real Estate 2.73% 0.0%
Financial Services 9.65% 0.0%
Consumer Cyclical 5.53% 94.1%
Basic Materials 1.65% 0.0%

The iShares MSCI USA Min Vol Factor ETF (USMV) has the most exposure to the Technology sector at 20.53%. This is followed by Healthcare and Consumer Defensive at 18.42% and 12.82% respectively. Basic Materials (1.65%), Real Estate (2.73%), and Consumer Cyclical (5.53%) only make up 9.91% of the fund’s total assets.

USMV’s mid-section with moderate exposure is comprised of Utilities, Financial Services, Industrials, Communication Services, and Consumer Defensive stocks at 6.93%, 9.65%, 10.51%, 11.03%, 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%.

USMV is 19.96% more exposed to the Technology sector than XLY (20.53% vs 0.57%). USMV’s exposure to Healthcare and Consumer Defensive stocks is 18.42% higher and 7.48% higher respectively (18.42% vs. 0.0% and 12.82% vs. 5.34%). In total, Basic Materials, Real Estate, and Consumer Cyclical also make up 84.19% less of the fund’s holdings compared to XLY (9.91% vs. 94.10%).

Holdings

USMV - Holdings

USMV Holdings Weight
Eli Lilly and Co 1.64%
Microsoft Corp 1.62%
T-Mobile US Inc 1.51%
Accenture PLC Class A 1.51%
Visa Inc Class A 1.49%
Waste Management Inc 1.45%
Adobe Inc 1.45%
The Kroger Co 1.44%
Johnson & Johnson 1.42%
Gilead Sciences Inc 1.42%

USMV’s Top Holdings are Eli Lilly and Co, Microsoft Corp, T-Mobile US Inc, Accenture PLC Class A, and Visa Inc Class A at 1.64%, 1.62%, 1.51%, 1.51%, and 1.49%.

Waste Management Inc (1.45%), Adobe Inc (1.45%), and The Kroger Co (1.44%) have a slightly smaller but still significant weight. Johnson & Johnson and Gilead Sciences Inc are also represented in the USMV’s holdings at 1.42% and 1.42%.

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%.

Risk Analysis

USMV XLY
Mean Return 0 1.47
R-squared 0 80.84
Std. Deviation 0 15.97
Alpha 0 6.96
Beta 0 1.02
Sharpe Ratio 0 1.06
Treynor Ratio 0 16.69

The iShares MSCI USA Min Vol Factor ETF (USMV) has a Alpha of 0 with a Treynor Ratio of 0 and a Mean Return of 0. Its Standard Deviation is 0 while USMV’s Beta is 0. Furthermore, the fund has a Sharpe Ratio of 0 and a R-squared of 0.

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

USMV’s Mean Return is 1.47 points lower than that of XLY and its R-squared is 80.84 points lower. With a Standard Deviation of 0, USMV is slightly less volatile than XLY. The Alpha and Beta of USMV are 6.96 points lower and 1.02 points lower than XLY’s Alpha and Beta.

Performance

Annual Returns

USMV vs. XLY - Annual Returns

Year USMV XLY
2020 5.6% 29.66%
2019 27.77% 28.43%
2018 1.36% 1.66%
2017 18.97% 22.77%
2016 10.5% 5.87%
2015 5.5% 9.93%
2014 16.34% 9.49%
2013 25.11% 42.74%
2012 11.04% 23.6%
2011 0.0% 5.98%
2010 0.0% 27.36%

USMV had its best year in 2019 with an annual return of 27.77%. USMV’s worst year over the past decade yielded 0.0% and occurred in 2011. In most years the iShares MSCI USA Min Vol Factor ETF provided moderate returns such as in 2020, 2016, and 2012 where annual returns amounted to 5.6%, 10.5%, and 11.04% 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

USMV vs. XLY - Portfolio Growth

Fund Initial Balance Final Balance CAGR
USMV $10,000 $27,607 13.89%
XLY $10,000 $37,802 18.86%

A $10,000 investment in USMV would have resulted in a final balance of $27,607. This is a profit of $17,607 over 8 years and amounts to a compound annual growth rate (CAGR) of 13.89%.

With a $10,000 investment in XLY, the end total would have been $37,802. This equates to a $27,802 profit over 8 years and a compound annual growth rate (CAGR) of 18.86%.

USMV’s CAGR is 4.97 percentage points lower than that of XLY and as a result, would have yielded $10,195 less on a $10,000 investment. Thus, USMV performed worse than XLY by 4.97% annually.


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