The Technology Select Sector SPDR Fund (XLK) and the Consumer Discretionary Select Sector SPDR Fund (XLY) are both among the Top 100 ETFs. XLK is a SPDR State Street Global Advisors Technology fund and XLY is a SPDR State Street Global Advisors Consumer Cyclical fund. So, what’s the difference between XLK and XLY? And which fund is better?
XLK and XLY have the same expense ratio: 0.12%. XLK also has a higher exposure to the technology sector and a lower standard deviation. Overall, XLK has provided higher returns than XLY over the past ten years.
In this article, we’ll compare XLK vs. XLY. We’ll look at risk metrics and fund composition, as well as at their holdings and portfolio growth. Moreover, I’ll also discuss XLK’s and XLY’s industry exposure, performance, and annual returns and examine how these affect their overall returns.
Summary
| XLK | XLY | |
| Name | Technology Select Sector SPDR Fund | Consumer Discretionary Select Sector SPDR Fund |
| Category | Technology | Consumer Cyclical |
| Issuer | SPDR State Street Global Advisors | SPDR State Street Global Advisors |
| AUM | 42.3B | 20.21B |
| Avg. Return | 20.02% | 18.86% |
| Div. Yield | 0.73% | 0.63% |
| Expense Ratio | 0.12% | 0.12% |
The Technology Select Sector SPDR Fund (XLK) is a Technology fund that is issued by SPDR State Street Global Advisors. It currently has 42.3B total assets under management and has yielded an average annual return of 20.02% over the past 10 years. The fund has a dividend yield of 0.73% 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%.
XLK’s dividend yield is 0.10% higher than that of XLY (0.73% vs. 0.63%). Also, XLK yielded on average 1.16% more per year over the past decade (20.02% vs. 18.86%). XLK and XLY have the same expense ratio: 0.12%.
Fund Composition
Industry Exposure
| XLK | XLY | |
| Technology | 87.54% | 0.57% |
| Industrials | 1.75% | 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 | 10.71% | 0.0% |
| Consumer Cyclical | 0.0% | 94.1% |
| Basic Materials | 0.0% | 0.0% |
The Technology Select Sector SPDR Fund (XLK) has the most exposure to the Technology sector at 87.54%. This is followed by Financial Services and Industrials at 10.71% and 1.75% 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.
XLK’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 1.75%.
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%.
XLK is 86.97% more exposed to the Technology sector than XLY (87.54% vs 0.57%). XLK’s exposure to Financial Services and Industrials stocks is 10.71% higher and 1.75% higher respectively (10.71% vs. 0.0% and 1.75% 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
| XLK Holdings | Weight |
| Apple Inc | 21.45% |
| Microsoft Corp | 20.37% |
| NVIDIA Corp | 4.98% |
| Visa Inc Class A | 3.95% |
| PayPal Holdings Inc | 3.42% |
| Mastercard Inc A | 3.19% |
| Adobe Inc | 2.8% |
| Salesforce.com Inc | 2.26% |
| Intel Corp | 2.26% |
| Cisco Systems Inc | 2.23% |
XLK’s Top Holdings are Apple Inc, Microsoft Corp, NVIDIA Corp, Visa Inc Class A, and PayPal Holdings Inc at 21.45%, 20.37%, 4.98%, 3.95%, and 3.42%.
Mastercard Inc A (3.19%), Adobe Inc (2.8%), and Salesforce.com Inc (2.26%) have a slightly smaller but still significant weight. Intel Corp and Cisco Systems Inc are also represented in the XLK’s holdings at 2.26% and 2.23%.
| 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
| XLK | XLY | |
| Mean Return | 1.7 | 1.47 |
| R-squared | 73.56 | 80.84 |
| Std. Deviation | 15.58 | 15.97 |
| Alpha | 10.43 | 6.96 |
| Beta | 0.95 | 1.02 |
| Sharpe Ratio | 1.27 | 1.06 |
| Treynor Ratio | 21.44 | 16.69 |
The Technology Select Sector SPDR Fund (XLK) has a Beta of 0.95 with a R-squared of 73.56 and a Sharpe Ratio of 1.27. Its Mean Return is 1.7 while XLK’s Treynor Ratio is 21.44. Furthermore, the fund has a Alpha of 10.43 and a Standard Deviation of 15.58.
The Consumer Discretionary Select Sector SPDR Fund (XLY) has a Beta of 1.02 with a Standard Deviation of 15.97 and a Treynor Ratio of 16.69. 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 Mean Return of 1.47.
XLK’s Mean Return is 0.23 points higher than that of XLY and its R-squared is 7.28 points lower. With a Standard Deviation of 15.58, XLK is slightly less volatile than XLY. The Alpha and Beta of XLK are 3.47 points higher and 0.07 points lower than XLY’s Alpha and Beta.
Performance
Annual Returns
| Year | XLK | XLY |
| 2020 | 43.67% | 29.66% |
| 2019 | 49.97% | 28.43% |
| 2018 | -1.56% | 1.66% |
| 2017 | 34.27% | 22.77% |
| 2016 | 14.81% | 5.87% |
| 2015 | 5.62% | 9.93% |
| 2014 | 17.75% | 9.49% |
| 2013 | 25.98% | 42.74% |
| 2012 | 15.47% | 23.6% |
| 2011 | 2.69% | 5.98% |
| 2010 | 11.6% | 27.36% |
XLK had its best year in 2019 with an annual return of 49.97%. XLK’s worst year over the past decade yielded -1.56% and occurred in 2018. In most years the Technology Select Sector SPDR Fund provided moderate returns such as in 2016, 2012, and 2014 where annual returns amounted to 14.81%, 15.47%, and 17.75% 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 |
| XLK | $10,000 | $67,790 | 20.02% |
| XLY | $10,000 | $63,066 | 18.86% |
A $10,000 investment in XLK would have resulted in a final balance of $67,790. This is a profit of $57,790 over 11 years and amounts to a compound annual growth rate (CAGR) of 20.02%.
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%.
XLK’s CAGR is 1.16 percentage points higher than that of XLY and as a result, would have yielded $4,724 more on a $10,000 investment. Thus, XLK outperformed XLY by 1.16% annually.
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