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XLY vs. DFAC: What’s The Difference?

The Consumer Discretionary Select Sector SPDR Fund (XLY) and the Dimensional U.S. Core Equity 2 ETF (DFAC) are both among the Top 100 ETFs. XLY is a SPDR State Street Global Advisors Consumer Cyclical fund and DFAC is a Dimensional Fund Advisors Large Blend fund. So, what’s the difference between XLY and DFAC? And which fund is better?

The expense ratio of XLY is 0.07 percentage points lower than DFAC’s (0.12% vs. 0.19%). XLY also has a higher exposure to the consumer cyclical sector and a higher standard deviation. Overall, XLY has provided higher returns than DFAC over the past 11 years.

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

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Summary

XLYDFAC
NameConsumer Discretionary Select Sector SPDR FundDimensional U.S. Core Equity 2 ETF
CategoryConsumer CyclicalLarge Blend
IssuerSPDR State Street Global AdvisorsDimensional Fund Advisors
AUM20.21B13.53B
Avg. Return18.86%13.93%
Div. Yield0.63%1.0%
Expense Ratio0.12%0.19%

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%.

The Dimensional U.S. Core Equity 2 ETF (DFAC) is a Large Blend fund that is issued by Dimensional Fund Advisors. It currently has 13.53B total assets under management and has yielded an average annual return of 13.93% over the past 10 years. The fund has a dividend yield of 1.0% with an expense ratio of 0.19%.

XLY’s dividend yield is 0.37% lower than that of DFAC (0.63% vs. 1.0%). Also, XLY yielded on average 4.93% more per year over the past decade (18.86% vs. 13.93%). The expense ratio of XLY is 0.07 percentage points lower than DFAC’s (0.12% vs. 0.19%).

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Fund Composition

Industry Exposure

XLY vs. DFAC - Industry Exposure

XLYDFAC
Technology0.57%22.81%
Industrials0.0%14.13%
Energy0.0%2.67%
Communication Services0.0%7.63%
Utilities0.0%1.54%
Healthcare0.0%12.09%
Consumer Defensive5.34%5.94%
Real Estate0.0%0.37%
Financial Services0.0%16.17%
Consumer Cyclical94.1%13.09%
Basic Materials0.0%3.56%

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%.

The Dimensional U.S. Core Equity 2 ETF (DFAC) has the most exposure to the Technology sector at 22.81%. This is followed by Financial Services and Industrials at 16.17% and 14.13% respectively. Utilities (1.54%), Energy (2.67%), and Basic Materials (3.56%) only make up 7.77% of the fund’s total assets.

DFAC’s mid-section with moderate exposure is comprised of Consumer Defensive, Communication Services, Healthcare, Consumer Cyclical, and Industrials stocks at 5.94%, 7.63%, 12.09%, 13.09%, and 14.13%.

XLY is 81.01% more exposed to the Consumer Cyclical sector than DFAC (94.1% vs 13.09%). XLY’s exposure to Consumer Defensive and Technology stocks is 0.60% lower and 22.24% lower respectively (5.34% vs. 5.94% and 0.57% vs. 22.81%). In total, Financial Services, Real Estate, and Healthcare also make up 28.63% less of the fund’s holdings compared to DFAC (0.00% vs. 28.63%).

Holdings

XLY - Holdings

XLY HoldingsWeight
Amazon.com Inc22.9%
Tesla Inc13.5%
The Home Depot Inc8.74%
McDonald’s Corp4.5%
Nike Inc B4.45%
Lowe’s Companies Inc3.58%
Starbucks Corp3.44%
Target Corp3.12%
Booking Holdings Inc2.35%
TJX Companies Inc2.12%

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%.

DFAC - Holdings

DFAC HoldingsWeight
Apple Inc4.7%
Microsoft Corp3.81%
Amazon.com Inc2.39%
Johnson & Johnson1.05%
Facebook Inc Class A1.05%
JPMorgan Chase & Co1.0%
Alphabet Inc Class C0.85%
Alphabet Inc Class A0.84%
Berkshire Hathaway Inc Class B0.75%
Visa Inc Class A0.74%

DFAC’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Johnson & Johnson, and Facebook Inc Class A at 4.7%, 3.81%, 2.39%, 1.05%, and 1.05%.

JPMorgan Chase & Co (1.0%), Alphabet Inc Class C (0.85%), and Alphabet Inc Class A (0.84%) have a slightly smaller but still significant weight. Berkshire Hathaway Inc Class B and Visa Inc Class A are also represented in the DFAC’s holdings at 0.75% and 0.74%.

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Risk Analysis

XLYDFAC
Mean Return1.471.19
R-squared80.8495.1
Std. Deviation15.9715.55
Alpha6.96-2.75
Beta1.021.12
Sharpe Ratio1.060.88
Treynor Ratio16.6911.85

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

The Dimensional U.S. Core Equity 2 ETF (DFAC) has a Beta of 1.12 with a R-squared of 95.1 and a Standard Deviation of 15.55. Its Alpha is -2.75 while DFAC’s Sharpe Ratio is 0.88. Furthermore, the fund has a Treynor Ratio of 11.85 and a Mean Return of 1.19.

XLY’s Mean Return is 0.28 points higher than that of DFAC and its R-squared is 14.26 points lower. With a Standard Deviation of 15.97, XLY is slightly more volatile than DFAC. The Alpha and Beta of XLY are 9.71 points higher and 0.10 points lower than DFAC’s Alpha and Beta.

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Performance

Annual Returns

XLY vs. DFAC - Annual Returns

YearXLYDFAC
202029.66%15.8%
201928.43%29.54%
20181.66%-9.43%
201722.77%18.82%
20165.87%16.31%
20159.93%-2.53%
20149.49%9.56%
201342.74%37.55%
201223.6%17.93%
20115.98%-1.96%
201027.36%21.67%

XLY had its best year in 2013 with an annual return of 42.74%. XLY’s worst year over the past decade yielded 1.66% and occurred in 2018. In most years the Consumer Discretionary Select Sector SPDR Fund provided moderate returns such as in 2015, 2017, and 2012 where annual returns amounted to 9.93%, 22.77%, and 23.6% respectively.

The year 2013 was the strongest year for DFAC, returning 37.55% on an annual basis. The poorest year for DFAC in the last ten years was 2018, with a yield of -9.43%. Most years the Dimensional U.S. Core Equity 2 ETF has given investors modest returns, such as in 2020, 2016, and 2012, when gains were 15.8%, 16.31%, and 17.93% respectively.

Portfolio Growth

XLY vs. DFAC - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
XLY$10,000$63,06618.86%
DFAC$10,000$38,79613.93%

A $10,000 investment in XLY would have resulted in a final balance of $63,066. This is a profit of $53,066 over 11 years and amounts to a compound annual growth rate (CAGR) of 18.86%.

With a $10,000 investment in DFAC, the end total would have been $38,796. This equates to a $28,796 profit over 11 years and a compound annual growth rate (CAGR) of 13.93%.

XLY’s CAGR is 4.93 percentage points higher than that of DFAC and as a result, would have yielded $24,270 more on a $10,000 investment. Thus, XLY outperformed DFAC by 4.93% annually.


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