XLI vs. IWN: What’s The Difference?

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

The expense ratio of XLI is 0.12 percentage points lower than IWN’s (0.12% vs. 0.24%). XLI also has a higher exposure to the industrials sector and a lower standard deviation. Overall, XLI has provided higher returns than IWN over the past 11 years.

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

Summary

XLI IWN
Name Industrial Select Sector SPDR Fund iShares Russell 2000 Value ETF
Category Industrials Small Value
Issuer SPDR State Street Global Advisors iShares
AUM 19.33B 15.48B
Avg. Return 14.44% 10.96%
Div. Yield 1.25% 1.26%
Expense Ratio 0.12% 0.24%

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%.

The iShares Russell 2000 Value ETF (IWN) is a Small Value fund that is issued by iShares. It currently has 15.48B total assets under management and has yielded an average annual return of 10.96% over the past 10 years. The fund has a dividend yield of 1.26% with an expense ratio of 0.24%.

XLI’s dividend yield is 0.01% lower than that of IWN (1.25% vs. 1.26%). Also, XLI yielded on average 3.48% more per year over the past decade (14.44% vs. 10.96%). The expense ratio of XLI is 0.12 percentage points lower than IWN’s (0.12% vs. 0.24%).

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Fund Composition

Industry Exposure

XLI vs. IWN - Industry Exposure

XLI IWN
Technology 1.82% 6.02%
Industrials 97.49% 14.58%
Energy 0.0% 5.84%
Communication Services 0.0% 4.17%
Utilities 0.0% 4.69%
Healthcare 0.0% 10.94%
Consumer Defensive 0.0% 3.77%
Real Estate 0.0% 14.36%
Financial Services 0.0% 22.97%
Consumer Cyclical 0.69% 8.39%
Basic Materials 0.0% 4.29%

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%.

The iShares Russell 2000 Value ETF (IWN) has the most exposure to the Financial Services sector at 22.97%. This is followed by Industrials and Real Estate at 14.58% and 14.36% respectively. Communication Services (4.17%), Basic Materials (4.29%), and Utilities (4.69%) only make up 13.15% of the fund’s total assets.

IWN’s mid-section with moderate exposure is comprised of Energy, Technology, Consumer Cyclical, Healthcare, and Real Estate stocks at 5.84%, 6.02%, 8.39%, 10.94%, and 14.36%.

XLI is 82.91% more exposed to the Industrials sector than IWN (97.49% vs 14.58%). XLI’s exposure to Technology and Consumer Cyclical stocks is 4.20% lower and 7.70% lower respectively (1.82% vs. 6.02% and 0.69% vs. 8.39%). In total, Financial Services, Real Estate, and Consumer Defensive also make up 41.10% less of the fund’s holdings compared to IWN (0.00% vs. 41.10%).

Holdings

XLI - Holdings

XLI Holdings Weight
Honeywell International Inc 4.9%
United Parcel Service Inc Class B 4.84%
Union Pacific Corp 4.7%
Boeing Co 4.24%
Raytheon Technologies Corp 4.16%
Caterpillar Inc 3.84%
General Electric Co 3.8%
3M Co 3.7%
Deere & Co 3.54%
Lockheed Martin Corp 2.98%

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%.

IWN - Holdings

IWN Holdings Weight
AMC Entertainment Holdings Inc Class A 1.06%
Tenet Healthcare Corp 0.47%
Stag Industrial Inc 0.47%
Ovintiv Inc 0.45%
EMCOR Group Inc 0.42%
Valley National Bancorp 0.37%
Chesapeake Energy Corp Ordinary Shares – New 0.37%
Agree Realty Corp 0.36%
Macy’s Inc 0.35%
Essent Group Ltd 0.35%

IWN’s Top Holdings are AMC Entertainment Holdings Inc Class A, Tenet Healthcare Corp, Stag Industrial Inc, Ovintiv Inc, and EMCOR Group Inc at 1.06%, 0.47%, 0.47%, 0.45%, and 0.42%.

Valley National Bancorp (0.37%), Chesapeake Energy Corp Ordinary Shares – New (0.37%), and Agree Realty Corp (0.36%) have a slightly smaller but still significant weight. Macy’s Inc and Essent Group Ltd are also represented in the IWN’s holdings at 0.35% and 0.35%.

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Risk Analysis

XLI IWN
Mean Return 1.14 1.01
R-squared 78.97 72.64
Std. Deviation 17.13 19.28
Alpha 2.38 -6.32
Beta 1.08 1.21
Sharpe Ratio 0.76 0.59
Treynor Ratio 11.34 8.3

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

The iShares Russell 2000 Value ETF (IWN) has a Sharpe Ratio of 0.59 with a Standard Deviation of 19.28 and a R-squared of 72.64. Its Beta is 1.21 while IWN’s Mean Return is 1.01. Furthermore, the fund has a Treynor Ratio of 8.3 and a Alpha of -6.32.

XLI’s Mean Return is 0.13 points higher than that of IWN and its R-squared is 6.33 points higher. With a Standard Deviation of 17.13, XLI is slightly less volatile than IWN. The Alpha and Beta of XLI are 8.70 points higher and 0.13 points lower than IWN’s Alpha and Beta.

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Performance

Annual Returns

XLI vs. IWN - Annual Returns

Year XLI IWN
2020 11.0% 4.5%
2019 29.11% 22.17%
2018 -13.1% -12.94%
2017 23.85% 7.73%
2016 19.93% 31.64%
2015 -4.27% -7.53%
2014 10.44% 4.13%
2013 40.44% 34.3%
2012 14.86% 17.92%
2011 -1.01% -5.64%
2010 27.62% 24.29%

XLI had its best year in 2013 with an annual return of 40.44%. XLI’s worst year over the past decade yielded -13.1% and occurred in 2018. In most years the Industrial Select Sector SPDR Fund provided moderate returns such as in 2020, 2012, and 2016 where annual returns amounted to 11.0%, 14.86%, and 19.93% respectively.

The year 2013 was the strongest year for IWN, returning 34.3% on an annual basis. The poorest year for IWN in the last ten years was 2018, with a yield of -12.94%. Most years the iShares Russell 2000 Value ETF has given investors modest returns, such as in 2020, 2017, and 2012, when gains were 4.5%, 7.73%, and 17.92% respectively.

Portfolio Growth

XLI vs. IWN - Portfolio Growth

Fund Initial Balance Final Balance CAGR
XLI $10,000 $39,853 14.44%
IWN $10,000 $28,189 10.96%

A $10,000 investment in XLI would have resulted in a final balance of $39,853. This is a profit of $29,853 over 11 years and amounts to a compound annual growth rate (CAGR) of 14.44%.

With a $10,000 investment in IWN, the end total would have been $28,189. This equates to a $18,189 profit over 11 years and a compound annual growth rate (CAGR) of 10.96%.

XLI’s CAGR is 3.48 percentage points higher than that of IWN and as a result, would have yielded $11,664 more on a $10,000 investment. Thus, XLI outperformed IWN by 3.48% annually.


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