XLY vs. SCHP: What’s The Difference?

The Consumer Discretionary Select Sector SPDR Fund (XLY) and the Schwab U.S. TIPS ETF (SCHP) are both among the Top 100 ETFs. XLY is a SPDR State Street Global Advisors Consumer Cyclical fund and SCHP is a Schwab ETFs Inflation-Protected Bond fund. So, what’s the difference between XLY and SCHP? And which fund is better?

The expense ratio of XLY is 0.07 percentage points higher than SCHP’s (0.12% vs. 0.05%). XLY also has a high exposure to the consumer cyclical sector while SCHP is mostly comprised of AAA bonds. Overall, XLY has provided higher returns than SCHP over the past 10 years.

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

Summary

XLY SCHP
Name Consumer Discretionary Select Sector SPDR Fund Schwab U.S. TIPS ETF
Category Consumer Cyclical Inflation-Protected Bond
Issuer SPDR State Street Global Advisors Schwab ETFs
AUM 20.21B 18.41B
Avg. Return 18.86% 3.92%
Div. Yield 0.63% 1.97%
Expense Ratio 0.12% 0.05%

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 Schwab U.S. TIPS ETF (SCHP) is a Inflation-Protected Bond fund that is issued by Schwab ETFs. It currently has 18.41B total assets under management and has yielded an average annual return of 3.92% over the past 10 years. The fund has a dividend yield of 1.97% with an expense ratio of 0.05%.

XLY’s dividend yield is 1.34% lower than that of SCHP (0.63% vs. 1.97%). Also, XLY yielded on average 14.95% more per year over the past decade (18.86% vs. 3.92%). The expense ratio of XLY is 0.07 percentage points higher than SCHP’s (0.12% vs. 0.05%).

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Fund Composition

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%.

SCHP - Holdings

SCHP Bond Sectors Weight
AAA 100.0%
Others 0.0%
Below B 0.0%
B 0.0%
BB 0.0%
BBB 0.0%
A 0.0%
AA 0.0%
US Government 0.0%

SCHP’s Top Bond Sectors are ratings of AAA, Others, Below B, B, and BB at 100.0%, 0.0%, 0.0%, 0.0%, and 0.0%. The fund is less weighted towards BBB (0.0%), A (0.0%), and AA (0.0%) rated bonds.

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Risk Analysis

XLY SCHP
Mean Return 1.47 0.28
R-squared 80.84 66.16
Std. Deviation 15.97 4.32
Alpha 6.96 -0.5
Beta 1.02 1.17
Sharpe Ratio 1.06 0.64
Treynor Ratio 16.69 2.31

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

The Schwab U.S. TIPS ETF (SCHP) has a Mean Return of 0.28 with a Standard Deviation of 4.32 and a Treynor Ratio of 2.31. Its Alpha is -0.5 while SCHP’s R-squared is 66.16. Furthermore, the fund has a Beta of 1.17 and a Sharpe Ratio of 0.64.

XLY’s Mean Return is 1.19 points higher than that of SCHP and its R-squared is 14.68 points higher. With a Standard Deviation of 15.97, XLY is slightly more volatile than SCHP. The Alpha and Beta of XLY are 7.46 points higher and 0.15 points lower than SCHP’s Alpha and Beta.

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Performance

Annual Returns

XLY vs. SCHP - Annual Returns

Year XLY SCHP
2020 29.66% 10.94%
2019 28.43% 8.36%
2018 1.66% -1.31%
2017 22.77% 2.95%
2016 5.87% 4.6%
2015 9.93% -1.5%
2014 9.49% 3.56%
2013 42.74% -8.66%
2012 23.6% 6.83%
2011 5.98% 13.38%
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 2011 was the strongest year for SCHP, returning 13.38% on an annual basis. The poorest year for SCHP in the last ten years was 2013, with a yield of -8.66%. Most years the Schwab U.S. TIPS ETF has given investors modest returns, such as in 2017, 2014, and 2016, when gains were 2.95%, 3.56%, and 4.6% respectively.

Portfolio Growth

XLY vs. SCHP - Portfolio Growth

Fund Initial Balance Final Balance CAGR
XLY $10,000 $49,518 18.86%
SCHP $10,000 $14,418 3.92%

A $10,000 investment in XLY would have resulted in a final balance of $49,518. This is a profit of $39,518 over 10 years and amounts to a compound annual growth rate (CAGR) of 18.86%.

With a $10,000 investment in SCHP, the end total would have been $14,418. This equates to a $4,418 profit over 10 years and a compound annual growth rate (CAGR) of 3.92%.

XLY’s CAGR is 14.95 percentage points higher than that of SCHP and as a result, would have yielded $35,100 more on a $10,000 investment. Thus, XLY outperformed SCHP by 14.95% annually.


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