The Consumer Discretionary Select Sector SPDR Fund (XLY) and the iShares MSCI EAFE Value ETF (EFV) are both among the Top 100 ETFs. XLY is a SPDR State Street Global Advisors Consumer Cyclical fund and EFV is a iShares Foreign Large Value fund. So, what’s the difference between XLY and EFV? And which fund is better?
The expense ratio of XLY is 0.27 percentage points lower than EFV’s (0.12% vs. 0.39%). XLY also has a higher exposure to the consumer cyclical sector and a lower standard deviation. Overall, XLY has provided higher returns than EFV over the past 11 years.
In this article, we’ll compare XLY vs. EFV. We’ll look at portfolio growth and risk metrics, as well as at their industry exposure and performance. Moreover, I’ll also discuss XLY’s and EFV’s annual returns, holdings, and fund composition and examine how these affect their overall returns.
|Name||Consumer Discretionary Select Sector SPDR Fund||iShares MSCI EAFE Value ETF|
|Category||Consumer Cyclical||Foreign Large Value|
|Issuer||SPDR State Street Global Advisors||iShares|
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 iShares MSCI EAFE Value ETF (EFV) is a Foreign Large Value fund that is issued by iShares. It currently has 14.37B total assets under management and has yielded an average annual return of 3.99% over the past 10 years. The fund has a dividend yield of 2.94% with an expense ratio of 0.39%.
XLY’s dividend yield is 2.31% lower than that of EFV (0.63% vs. 2.94%). Also, XLY yielded on average 14.87% more per year over the past decade (18.86% vs. 3.99%). The expense ratio of XLY is 0.27 percentage points lower than EFV’s (0.12% vs. 0.39%).
FYI: The best way I've found to invest in ETFs is through M1 Finance. It's free and you even get an instant line of credit! Have a look here (link to M1 Finance).
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 iShares MSCI EAFE Value ETF (EFV) has the most exposure to the Financial Services sector at 26.55%. This is followed by Industrials and Basic Materials at 11.6% and 9.59% respectively. Real Estate (5.06%), Utilities (6.14%), and Communication Services (6.46%) only make up 17.66% of the fund’s total assets.
EFV’s mid-section with moderate exposure is comprised of Energy, Consumer Defensive, Consumer Cyclical, Healthcare, and Basic Materials stocks at 6.6%, 6.82%, 9.0%, 9.19%, and 9.59%.
XLY is 85.10% more exposed to the Consumer Cyclical sector than EFV (94.1% vs 9.0%). XLY’s exposure to Consumer Defensive and Technology stocks is 1.48% lower and 2.41% lower respectively (5.34% vs. 6.82% and 0.57% vs. 2.98%). In total, Financial Services, Real Estate, and Healthcare also make up 40.80% less of the fund’s holdings compared to EFV (0.00% vs. 40.80%).
|The Home Depot Inc||8.74%|
|Nike Inc B||4.45%|
|Lowe’s Companies Inc||3.58%|
|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%.
|Toyota Motor Corp||2.21%|
|Commonwealth Bank of Australia||1.59%|
|HSBC Holdings PLC||1.4%|
|Rio Tinto PLC||1.1%|
EFV’s Top Holdings are Novartis AG, Toyota Motor Corp, Commonwealth Bank of Australia, Siemens AG, and Sanofi SA at 2.41%, 2.21%, 1.59%, 1.45%, and 1.42%.
HSBC Holdings PLC (1.4%), TotalEnergies SE (1.35%), and Allianz SE (1.23%) have a slightly smaller but still significant weight. GlaxoSmithKline PLC and Rio Tinto PLC are also represented in the EFV’s holdings at 1.18% and 1.1%.
NOTE: The easiest way to add diversification to your portfolio is to invest in real estate through Fundrise. You can become private real estate investor without the burden of property management! Check it out here (link to Fundrise).
The Consumer Discretionary Select Sector SPDR Fund (XLY) has a Beta of 1.02 with a R-squared of 80.84 and a Treynor Ratio of 16.69. Its Mean Return is 1.47 while XLY’s Alpha is 6.96. Furthermore, the fund has a Standard Deviation of 15.97 and a Sharpe Ratio of 1.06.
The iShares MSCI EAFE Value ETF (EFV) has a Treynor Ratio of 2.92 with a Sharpe Ratio of 0.26 and a Standard Deviation of 16.53. Its Mean Return is 0.42 while EFV’s R-squared is 92.15. Furthermore, the fund has a Beta of 1.05 and a Alpha of -1.77.
XLY’s Mean Return is 1.05 points higher than that of EFV and its R-squared is 11.31 points lower. With a Standard Deviation of 15.97, XLY is slightly less volatile than EFV. The Alpha and Beta of XLY are 8.73 points higher and 0.03 points lower than EFV’s Alpha and Beta.
FYI: Another great way to get exposure to the real estate sector is by investing in real estate debt. Groundfloor offers fantastic short-term, high-yield bonds that can add diversification to your portfolio!
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 EFV, returning 22.61% on an annual basis. The poorest year for EFV in the last ten years was 2018, with a yield of -14.88%. Most years the iShares MSCI EAFE Value ETF has given investors modest returns, such as in 2020, 2010, and 2016, when gains were -2.78%, 3.18%, and 4.87% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
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 EFV, the end total would have been $14,134. This equates to a $4,134 profit over 11 years and a compound annual growth rate (CAGR) of 3.99%.
XLY’s CAGR is 14.87 percentage points higher than that of EFV and as a result, would have yielded $48,932 more on a $10,000 investment. Thus, XLY outperformed EFV by 14.87% annually.
Over the past years, I have discovered several tools and products that have helped me tremendously on my path to financial freedom:
P.S.: The links below are affiliate links, which means I receive a small commission at no extra cost to you when you sign up for one of the services. Thank you for your support!
1)Personal Capital is simply the best tool out there to track your net worth and plan for financial freedom. Just their retirement planner alone has become an invaluable tool to keep myself on track financially. Try it out, it's free!
2) Take a look at M1 Finance, my favorite broker. I love how easy it is to invest and maintain my portfolio with them. I can set up automatic transfers, rebalance my portfolio with one click and even borrow up to 35% of my assets at super low interest rates!
3) Fundrise is by far the best way I've found to invest in Real Estate. You can diversify your portfolio by investing in their eREITs or even allocate capital to individual properties (without the hassle of managing tenants!).
4) Groundfloor is another great way to get exposure to the real estate sector by investing in short-term, high-yield real estate debt. Current returns are >10% and you can get started with just $10.
5) If you are interested in startup investing, check out Mainvest. I've started allocating a small amount of assets to invest in and support small businesses. Return targets are between 10-25% and you can start with just $100!
To see all of my most up-to-date recommendations, check out the Recommended Tools section.