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XLY vs. VTIP: What’s The Difference?

The Consumer Discretionary Select Sector SPDR Fund (XLY) and the Vanguard Short-Term Inflation-Protected Securities Index Fund ETF Shares (VTIP) are both among the Top 100 ETFs. XLY is a SPDR State Street Global Advisors Consumer Cyclical fund and VTIP is a Vanguard Inflation-Protected Bond fund. So, what’s the difference between XLY and VTIP? And which fund is better?

The expense ratio of XLY is 0.07 percentage points higher than VTIP’s (0.12% vs. 0.05%). XLY also has a high exposure to the consumer cyclical sector while VTIP is mostly comprised of AAA bonds. Overall, XLY has provided higher returns than VTIP over the past 7 years.

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

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Summary

XLYVTIP
NameConsumer Discretionary Select Sector SPDR FundVanguard Short-Term Inflation-Protected Securities Index Fund ETF Shares
CategoryConsumer CyclicalInflation-Protected Bond
IssuerSPDR State Street Global AdvisorsVanguard
AUM20.21B50.67B
Avg. Return18.86%1.79%
Div. Yield0.63%1.35%
Expense Ratio0.12%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 Vanguard Short-Term Inflation-Protected Securities Index Fund ETF Shares (VTIP) is a Inflation-Protected Bond fund that is issued by Vanguard. It currently has 50.67B total assets under management and has yielded an average annual return of 1.79% over the past 10 years. The fund has a dividend yield of 1.35% with an expense ratio of 0.05%.

XLY’s dividend yield is 0.72% lower than that of VTIP (0.63% vs. 1.35%). Also, XLY yielded on average 17.07% more per year over the past decade (18.86% vs. 1.79%). The expense ratio of XLY is 0.07 percentage points higher than VTIP’s (0.12% vs. 0.05%).

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Fund Composition

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%.

VTIP - Holdings

VTIP Bond SectorsWeight
AAA99.87%
Others0.13%
Below B0.0%
B0.0%
BB0.0%
BBB0.0%
A0.0%
AA0.0%
US Government0.0%

VTIP’s Top Bond Sectors are ratings of AAA, Others, Below B, B, and BB at 99.87%, 0.13%, 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

XLYVTIP
Mean Return1.470
R-squared80.840
Std. Deviation15.970
Alpha6.960
Beta1.020
Sharpe Ratio1.060
Treynor Ratio16.690

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

The Vanguard Short-Term Inflation-Protected Securities Index Fund ETF Shares (VTIP) has a Sharpe Ratio of 0 with a Mean Return of 0 and a Alpha of 0. Its Beta is 0 while VTIP’s R-squared is 0. Furthermore, the fund has a Standard Deviation of 0 and a Treynor Ratio of 0.

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

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Performance

Annual Returns

XLY vs. VTIP - Annual Returns

YearXLYVTIP
202029.66%4.97%
201928.43%4.83%
20181.66%0.54%
201722.77%0.82%
20165.87%2.71%
20159.93%-0.15%
20149.49%-1.17%
201342.74%-1.55%
201223.6%0.0%
20115.98%0.0%
201027.36%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 2020 was the strongest year for VTIP, returning 4.97% on an annual basis. The poorest year for VTIP in the last ten years was 2013, with a yield of -1.55%. Most years the Vanguard Short-Term Inflation-Protected Securities Index Fund ETF Shares has given investors modest returns, such as in 2011, 2010, and 2018, when gains were 0.0%, 0.0%, and 0.54% respectively.

Portfolio Growth

XLY vs. VTIP - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
XLY$10,000$26,48318.86%
VTIP$10,000$11,3051.79%

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 VTIP, the end total would have been $11,305. This equates to a $1,305 profit over 7 years and a compound annual growth rate (CAGR) of 1.79%.

XLY’s CAGR is 17.07 percentage points higher than that of VTIP and as a result, would have yielded $15,178 more on a $10,000 investment. Thus, XLY outperformed VTIP by 17.07% annually.


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