XLF vs. XLY: What’s The Difference?

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

XLF and XLY have the same expense ratio: 0.12%. XLF also has a higher exposure to the financial services sector and a higher standard deviation. Overall, XLF has provided lower returns than XLY over the past ten years.

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

Summary

XLF XLY
Name Financial Select Sector SPDR Fund Consumer Discretionary Select Sector SPDR Fund
Category Financial Consumer Cyclical
Issuer SPDR State Street Global Advisors SPDR State Street Global Advisors
AUM 40.81B 20.21B
Avg. Return 12.17% 18.86%
Div. Yield 1.57% 0.63%
Expense Ratio 0.12% 0.12%

The Financial Select Sector SPDR Fund (XLF) is a Financial fund that is issued by SPDR State Street Global Advisors. It currently has 40.81B total assets under management and has yielded an average annual return of 12.17% over the past 10 years. The fund has a dividend yield of 1.57% with an expense ratio of 0.12%.

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%.

XLF’s dividend yield is 0.94% higher than that of XLY (1.57% vs. 0.63%). Also, XLF yielded on average 6.70% less per year over the past decade (12.17% vs. 18.86%). XLF and XLY have the same expense ratio: 0.12%.

Fund Composition

Industry Exposure

XLF vs. XLY - Industry Exposure

XLF XLY
Technology 0.0% 0.57%
Industrials 0.0% 0.0%
Energy 0.0% 0.0%
Communication Services 0.0% 0.0%
Utilities 0.0% 0.0%
Healthcare 0.0% 0.0%
Consumer Defensive 0.0% 5.34%
Real Estate 0.0% 0.0%
Financial Services 100.0% 0.0%
Consumer Cyclical 0.0% 94.1%
Basic Materials 0.0% 0.0%

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

XLF’s mid-section with moderate exposure is comprised of Healthcare, Utilities, Communication Services, Energy, and Industrials stocks at 0.0%, 0.0%, 0.0%, 0.0%, and 0.0%.

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%.

XLF is 100.00% more exposed to the Financial Services sector than XLY (100.0% vs 0.0%). XLF’s exposure to Technology and Industrials stocks is 0.57% lower and 0.00% lower respectively (0.0% vs. 0.57% and 0.0% vs. 0.0%). In total, Consumer Cyclical, Real Estate, and Consumer Defensive also make up 99.44% less of the fund’s holdings compared to XLY (0.00% vs. 99.44%).

Holdings

XLF - Holdings

XLF Holdings Weight
Berkshire Hathaway Inc Class B 12.83%
JPMorgan Chase & Co 11.47%
Bank of America Corp 7.57%
Wells Fargo & Co 4.56%
Citigroup Inc 3.56%
Morgan Stanley 3.32%
Goldman Sachs Group Inc 3.15%
BlackRock Inc 3.02%
Charles Schwab Corp 2.66%
American Express Co 2.62%

XLF’s Top Holdings are Berkshire Hathaway Inc Class B, JPMorgan Chase & Co, Bank of America Corp, Wells Fargo & Co, and Citigroup Inc at 12.83%, 11.47%, 7.57%, 4.56%, and 3.56%.

Morgan Stanley (3.32%), Goldman Sachs Group Inc (3.15%), and BlackRock Inc (3.02%) have a slightly smaller but still significant weight. Charles Schwab Corp and American Express Co are also represented in the XLF’s holdings at 2.66% and 2.62%.

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

XLF XLY
Mean Return 1.21 1.47
R-squared 73.26 80.84
Std. Deviation 18.86 15.97
Alpha 2.63 6.96
Beta 1.15 1.02
Sharpe Ratio 0.74 1.06
Treynor Ratio 11.25 16.69

The Financial Select Sector SPDR Fund (XLF) has a Beta of 1.15 with a Mean Return of 1.21 and a Standard Deviation of 18.86. Its Alpha is 2.63 while XLF’s R-squared is 73.26. Furthermore, the fund has a Treynor Ratio of 11.25 and a Sharpe Ratio of 0.74.

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

XLF’s Mean Return is 0.26 points lower than that of XLY and its R-squared is 7.58 points lower. With a Standard Deviation of 18.86, XLF is slightly more volatile than XLY. The Alpha and Beta of XLF are 4.33 points lower and 0.13 points higher than XLY’s Alpha and Beta.

Performance

Annual Returns

XLF vs. XLY - Annual Returns

Year XLF XLY
2020 -1.68% 29.66%
2019 31.88% 28.43%
2018 -13.09% 1.66%
2017 22.03% 22.77%
2016 22.55% 5.87%
2015 -1.6% 9.93%
2014 15.02% 9.49%
2013 35.37% 42.74%
2012 28.53% 23.6%
2011 -17.16% 5.98%
2010 11.97% 27.36%

XLF had its best year in 2013 with an annual return of 35.37%. XLF’s worst year over the past decade yielded -17.16% and occurred in 2011. In most years the Financial Select Sector SPDR Fund provided moderate returns such as in 2010, 2014, and 2017 where annual returns amounted to 11.97%, 15.02%, and 22.03% 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

XLF vs. XLY - Portfolio Growth

Fund Initial Balance Final Balance CAGR
XLF $10,000 $30,782 12.17%
XLY $10,000 $63,066 18.86%

A $10,000 investment in XLF would have resulted in a final balance of $30,782. This is a profit of $20,782 over 11 years and amounts to a compound annual growth rate (CAGR) of 12.17%.

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%.

XLF’s CAGR is 6.70 percentage points lower than that of XLY and as a result, would have yielded $32,284 less on a $10,000 investment. Thus, XLF performed worse than XLY by 6.70% annually.


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