XLY vs. XLC: What’s The Difference?

The Consumer Discretionary Select Sector SPDR Fund (XLY) and the Communication Services Select Sector SPDR Fund (XLC) are both among the Top 100 ETFs. XLY is a SPDR State Street Global Advisors Consumer Cyclical fund and XLC is a SPDR State Street Global Advisors Communications fund. So, what’s the difference between XLY and XLC? And which fund is better?

XLY and XLC have the same expense ratio: 0.12%. XLY also has a higher exposure to the consumer cyclical sector and a higher standard deviation. Overall, XLY has provided lower returns than XLC over the past 2 years.

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

Summary

XLY XLC
Name Consumer Discretionary Select Sector SPDR Fund Communication Services Select Sector SPDR Fund
Category Consumer Cyclical Communications
Issuer SPDR State Street Global Advisors SPDR State Street Global Advisors
AUM 20.21B 14.09B
Avg. Return 18.86% 29.04%
Div. Yield 0.63% 0.62%
Expense Ratio 0.12% 0.12%

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 Communication Services Select Sector SPDR Fund (XLC) is a Communications fund that is issued by SPDR State Street Global Advisors. It currently has 14.09B total assets under management and has yielded an average annual return of 29.04% over the past 10 years. The fund has a dividend yield of 0.62% with an expense ratio of 0.12%.

XLY’s dividend yield is 0.01% higher than that of XLC (0.63% vs. 0.62%). Also, XLY yielded on average 10.17% less per year over the past decade (18.86% vs. 29.04%). XLY and XLC have the same expense ratio: 0.12%.

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).

Fund Composition

Industry Exposure

XLY vs. XLC - Industry Exposure

XLY XLC
Technology 0.57% 0.0%
Industrials 0.0% 0.0%
Energy 0.0% 0.0%
Communication Services 0.0% 100.0%
Utilities 0.0% 0.0%
Healthcare 0.0% 0.0%
Consumer Defensive 5.34% 0.0%
Real Estate 0.0% 0.0%
Financial Services 0.0% 0.0%
Consumer Cyclical 94.1% 0.0%
Basic Materials 0.0% 0.0%

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 Communication Services Select Sector SPDR Fund (XLC) has the most exposure to the Communication Services sector at 100.0%. This is followed by Technology and Industrials at 0.0% and 0.0% respectively. Consumer Cyclical (0.0%), Financial Services (0.0%), and Real Estate (0.0%) only make up 0.00% of the fund’s total assets.

XLC’s mid-section with moderate exposure is comprised of Consumer Defensive, Healthcare, Utilities, Energy, and Industrials stocks at 0.0%, 0.0%, 0.0%, 0.0%, and 0.0%.

XLY is 94.10% more exposed to the Consumer Cyclical sector than XLC (94.1% vs 0.0%). XLY’s exposure to Consumer Defensive and Technology stocks is 5.34% higher and 0.57% higher respectively (5.34% vs. 0.0% and 0.57% vs. 0.0%). In total, Financial Services, Real Estate, and Healthcare also make up 0.00% less of the fund’s holdings compared to XLC (0.00% vs. 0.00%).

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%.

XLC - Holdings

XLC Holdings Weight
Facebook Inc A 23.75%
Alphabet Inc A 11.49%
Alphabet Inc Class C 11.16%
Netflix Inc 4.78%
Charter Communications Inc A 4.65%
Comcast Corp Class A 4.44%
T-Mobile US Inc 4.41%
The Walt Disney Co 4.39%
AT&T Inc 4.35%
Verizon Communications Inc 4.33%

XLC’s Top Holdings are Facebook Inc A, Alphabet Inc A, Alphabet Inc Class C, Netflix Inc, and Charter Communications Inc A at 23.75%, 11.49%, 11.16%, 4.78%, and 4.65%.

Comcast Corp Class A (4.44%), T-Mobile US Inc (4.41%), and The Walt Disney Co (4.39%) have a slightly smaller but still significant weight. AT&T Inc and Verizon Communications Inc are also represented in the XLC’s holdings at 4.35% and 4.33%.

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).

Risk Analysis

XLY XLC
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 Standard Deviation of 15.97 with a Treynor Ratio of 16.69 and a R-squared of 80.84. Its Mean Return is 1.47 while XLY’s Alpha is 6.96. Furthermore, the fund has a Sharpe Ratio of 1.06 and a Beta of 1.02.

The Communication Services Select Sector SPDR Fund (XLC) has a Sharpe Ratio of 0 with a Treynor Ratio of 0 and a Beta of 0. Its Alpha is 0 while XLC’s Mean Return is 0. Furthermore, the fund has a Standard Deviation of 0 and a R-squared of 0.

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

BTW: Uncorrelated crypto assets such as Bitcoin can serve as a hedge and mitigate risk. I've allocated around 5% of my portfolio to crypto assets through Coinbase - the simplest and cheapest broker I've found! Click here to read more (link to Coinbase).

Performance

Annual Returns

XLY vs. XLC - Annual Returns

Year XLY XLC
2020 29.66% 26.85%
2019 28.43% 31.22%
2018 1.66% 0.0%
2017 22.77% 0.0%
2016 5.87% 0.0%
2015 9.93% 0.0%
2014 9.49% 0.0%
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 2019 was the strongest year for XLC, returning 31.22% on an annual basis. The poorest year for XLC in the last ten years was 2018, with a yield of 0.0%. Most years the Communication Services Select Sector SPDR Fund has given investors modest returns, such as in 2014, 2013, and 2012, when gains were 0.0%, 0.0%, and 0.0% respectively.

Portfolio Growth

XLY vs. XLC - Portfolio Growth

Fund Initial Balance Final Balance CAGR
XLY $10,000 $16,652 18.86%
XLC $10,000 $16,645 29.04%

A $10,000 investment in XLY would have resulted in a final balance of $16,652. This is a profit of $6,652 over 2 years and amounts to a compound annual growth rate (CAGR) of 18.86%.

With a $10,000 investment in XLC, the end total would have been $16,645. This equates to a $6,645 profit over 2 years and a compound annual growth rate (CAGR) of 29.04%.

XLY’s CAGR is 10.17 percentage points lower than that of XLC and as a result, would have yielded $7 more on a $10,000 investment. Thus, XLY performed worse than XLC by 10.17% annually.


Current recommendations:

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) 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!

2) 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!).

3) If you are interested in crypto, check out Coinbase. I've started allocating a small amount of assets to the growing crypto space and Coinbase has just been a breeze to use. Once you register, make sure to also open an Coinbase Pro account to buy crypto at the lowest fees on the market (just 0.1%!).

To see all of my most up-to-date recommendations, check out the Recommended Tools section.

Leave a Reply