XLY vs. MTUM: What’s The Difference?

The Consumer Discretionary Select Sector SPDR Fund (XLY) and the iShares MSCI USA Momentum Factor ETF (MTUM) are both among the Top 100 ETFs. XLY is a SPDR State Street Global Advisors Consumer Cyclical fund and MTUM is a iShares Large Growth fund. So, what’s the difference between XLY and MTUM? And which fund is better?

The expense ratio of XLY is 0.03 percentage points lower than MTUM’s (0.12% vs. 0.15%). XLY also has a higher exposure to the consumer cyclical sector and a higher standard deviation. Overall, XLY has provided higher returns than MTUM over the past 7 years.

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

Summary

XLY MTUM
Name Consumer Discretionary Select Sector SPDR Fund iShares MSCI USA Momentum Factor ETF
Category Consumer Cyclical Large Growth
Issuer SPDR State Street Global Advisors iShares
AUM 20.21B 14.53B
Avg. Return 18.86% 17.37%
Div. Yield 0.63% 0.44%
Expense Ratio 0.12% 0.15%

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 USA Momentum Factor ETF (MTUM) is a Large Growth fund that is issued by iShares. It currently has 14.53B total assets under management and has yielded an average annual return of 17.37% over the past 10 years. The fund has a dividend yield of 0.44% with an expense ratio of 0.15%.

XLY’s dividend yield is 0.19% higher than that of MTUM (0.63% vs. 0.44%). Also, XLY yielded on average 1.49% more per year over the past decade (18.86% vs. 17.37%). The expense ratio of XLY is 0.03 percentage points lower than MTUM’s (0.12% vs. 0.15%).

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Fund Composition

Industry Exposure

XLY vs. MTUM - Industry Exposure

XLY MTUM
Technology 0.57% 15.24%
Industrials 0.0% 12.47%
Energy 0.0% 1.77%
Communication Services 0.0% 13.18%
Utilities 0.0% 0.19%
Healthcare 0.0% 6.41%
Consumer Defensive 5.34% 2.88%
Real Estate 0.0% 0.43%
Financial Services 0.0% 34.32%
Consumer Cyclical 94.1% 9.96%
Basic Materials 0.0% 3.15%

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 USA Momentum Factor ETF (MTUM) has the most exposure to the Financial Services sector at 34.32%. This is followed by Technology and Communication Services at 15.24% and 13.18% respectively. Real Estate (0.43%), Energy (1.77%), and Consumer Defensive (2.88%) only make up 5.08% of the fund’s total assets.

MTUM’s mid-section with moderate exposure is comprised of Basic Materials, Healthcare, Consumer Cyclical, Industrials, and Communication Services stocks at 3.15%, 6.41%, 9.96%, 12.47%, and 13.18%.

XLY is 84.14% more exposed to the Consumer Cyclical sector than MTUM (94.1% vs 9.96%). XLY’s exposure to Consumer Defensive and Technology stocks is 2.46% higher and 14.67% lower respectively (5.34% vs. 2.88% and 0.57% vs. 15.24%). In total, Financial Services, Real Estate, and Healthcare also make up 41.16% less of the fund’s holdings compared to MTUM (0.00% vs. 41.16%).

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%.

MTUM - Holdings

MTUM Holdings Weight
Tesla Inc 5.63%
The Walt Disney Co 4.39%
JPMorgan Chase & Co 4.35%
Berkshire Hathaway Inc Class B 4.34%
Bank of America Corp 3.81%
PayPal Holdings Inc 3.76%
Wells Fargo & Co 3.05%
Applied Materials Inc 3.05%
Moderna Inc 2.89%
Alphabet Inc Class C 2.84%

MTUM’s Top Holdings are Tesla Inc, The Walt Disney Co, JPMorgan Chase & Co, Berkshire Hathaway Inc Class B, and Bank of America Corp at 5.63%, 4.39%, 4.35%, 4.34%, and 3.81%.

PayPal Holdings Inc (3.76%), Wells Fargo & Co (3.05%), and Applied Materials Inc (3.05%) have a slightly smaller but still significant weight. Moderna Inc and Alphabet Inc Class C are also represented in the MTUM’s holdings at 2.89% and 2.84%.

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Risk Analysis

XLY MTUM
Mean Return 1.47 0
R-squared 80.84 0
Std. Deviation 15.97 0
Alpha 6.96 0
Beta 1.02 0
Sharpe Ratio 1.06 0
Treynor Ratio 16.69 0

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

The iShares MSCI USA Momentum Factor ETF (MTUM) has a Alpha of 0 with a R-squared of 0 and a Mean Return of 0. Its Treynor Ratio is 0 while MTUM’s Sharpe Ratio is 0. Furthermore, the fund has a Standard Deviation of 0 and a Beta of 0.

XLY’s Mean Return is 1.47 points higher than that of MTUM and its R-squared is 80.84 points higher. With a Standard Deviation of 15.97, XLY is slightly more volatile than MTUM. The Alpha and Beta of XLY are 6.96 points higher and 1.02 points higher than MTUM’s Alpha and Beta.

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Performance

Annual Returns

XLY vs. MTUM - Annual Returns

Year XLY MTUM
2020 29.66% 29.69%
2019 28.43% 27.57%
2018 1.66% -1.77%
2017 22.77% 37.6%
2016 5.87% 4.89%
2015 9.93% 9.12%
2014 9.49% 14.48%
2013 42.74% 0.0%
2012 23.6% 0.0%
2011 5.98% 0.0%
2010 27.36% 0.0%

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 2017 was the strongest year for MTUM, returning 37.6% on an annual basis. The poorest year for MTUM in the last ten years was 2018, with a yield of -1.77%. Most years the iShares MSCI USA Momentum Factor ETF has given investors modest returns, such as in 2010, 2016, and 2015, when gains were 0.0%, 4.89%, and 9.12% respectively.

Portfolio Growth

XLY vs. MTUM - Portfolio Growth

Fund Initial Balance Final Balance CAGR
XLY $10,000 $26,483 18.86%
MTUM $10,000 $29,301 17.37%

A $10,000 investment in XLY would have resulted in a final balance of $26,483. This is a profit of $16,483 over 7 years and amounts to a compound annual growth rate (CAGR) of 18.86%.

With a $10,000 investment in MTUM, the end total would have been $29,301. This equates to a $19,301 profit over 7 years and a compound annual growth rate (CAGR) of 17.37%.

XLY’s CAGR is 1.49 percentage points higher than that of MTUM and as a result, would have yielded $2,818 less on a $10,000 investment. Thus, XLY outperformed MTUM by 1.49% annually.


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