XLY vs. IWN: What’s The Difference?

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

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

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

Summary

XLY IWN
Name Consumer Discretionary Select Sector SPDR Fund iShares Russell 2000 Value ETF
Category Consumer Cyclical Small Value
Issuer SPDR State Street Global Advisors iShares
AUM 20.21B 15.48B
Avg. Return 18.86% 10.96%
Div. Yield 0.63% 1.26%
Expense Ratio 0.12% 0.24%

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 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%.

XLY’s dividend yield is 0.63% lower than that of IWN (0.63% vs. 1.26%). Also, XLY yielded on average 7.90% more per year over the past decade (18.86% vs. 10.96%). The expense ratio of XLY is 0.12 percentage points lower than IWN’s (0.12% vs. 0.24%).

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Fund Composition

Industry Exposure

XLY vs. IWN - Industry Exposure

XLY IWN
Technology 0.57% 6.02%
Industrials 0.0% 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 5.34% 3.77%
Real Estate 0.0% 14.36%
Financial Services 0.0% 22.97%
Consumer Cyclical 94.1% 8.39%
Basic Materials 0.0% 4.29%

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 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%.

XLY is 85.71% more exposed to the Consumer Cyclical sector than IWN (94.1% vs 8.39%). XLY’s exposure to Consumer Defensive and Technology stocks is 1.57% higher and 5.45% lower respectively (5.34% vs. 3.77% and 0.57% vs. 6.02%). In total, Financial Services, Real Estate, and Healthcare also make up 48.27% less of the fund’s holdings compared to IWN (0.00% vs. 48.27%).

Holdings

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%.

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

XLY IWN
Mean Return 1.47 1.01
R-squared 80.84 72.64
Std. Deviation 15.97 19.28
Alpha 6.96 -6.32
Beta 1.02 1.21
Sharpe Ratio 1.06 0.59
Treynor Ratio 16.69 8.3

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

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

XLY’s Mean Return is 0.46 points higher than that of IWN and its R-squared is 8.20 points higher. With a Standard Deviation of 15.97, XLY is slightly less volatile than IWN. The Alpha and Beta of XLY are 13.28 points higher and 0.19 points lower than IWN’s Alpha and Beta.

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Performance

Annual Returns

XLY vs. IWN - Annual Returns

Year XLY IWN
2020 29.66% 4.5%
2019 28.43% 22.17%
2018 1.66% -12.94%
2017 22.77% 7.73%
2016 5.87% 31.64%
2015 9.93% -7.53%
2014 9.49% 4.13%
2013 42.74% 34.3%
2012 23.6% 17.92%
2011 5.98% -5.64%
2010 27.36% 24.29%

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 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

XLY vs. IWN - Portfolio Growth

Fund Initial Balance Final Balance CAGR
XLY $10,000 $63,066 18.86%
IWN $10,000 $28,189 10.96%

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 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%.

XLY’s CAGR is 7.90 percentage points higher than that of IWN and as a result, would have yielded $34,877 more on a $10,000 investment. Thus, XLY outperformed IWN by 7.90% annually.


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