The Consumer Discretionary Select Sector SPDR® Fund (XLY) has outperformed an S&P 500 index fund by 2.84% CAGR over the past 19 years.
XLY vs S&P 500: January 1999 – August 2018
Source: https://www.portfoliovisualizer.com/
The outperformance of this Consumer Discretionary sector fund has resulted in a positive return of 478.1% while an S&P 500 index fund produced a 257.5% return.
XLY vs S&P 500: December 16, 1998 – September 16, 2018
Source: https://www.koyfin.com/home
There are currently 24 ETFs in the Morningstar Consumer Cyclical category. 14 of these ETFs are 10 years old or older. I have ranked these 14 Consumer Discretionary sector ETFs by long-term performance.
Source: https://www.morningstar.com/
I have selected the top 4 Consumer Cyclical ETFs to compare head-to-head:
XLY vs VCR vs IYC vs PEJ: July 2005 – August 2018
Source: https://www.portfoliovisualizer.com/
Here are the same 4 Consumer Cyclical ETFs compared to an S&P 500 index fund:
XLY vs VCR vs IYC vs PEJ vs S&P 500: 6/23/2005 through 8/16/2018
Source: https://www.koyfin.com/home
VCR and IYC are neck-n-neck on the last two back-test charts, so here is a chart showing them head-to-head, to show why I positioned VCR over IYC in the rankings:
VCR vs IYC: January 26, 2004 – August 16, 2018
Source: https://www.koyfin.com/home
Here are the pertinents and such for the top 4 Consumer Cyclical ETFs:
XLY – The Consumer Discretionary Select Sector SPDR® Fund seeks to provide investment results that, before expenses, correspond generally to the price and yield performance of the Consumer Discretionary Select Sector Index (the “Index”). The Index seeks to provide an effective representation of the consumer discretionary sector of the S&P 500 Index. Seeks to provide precise exposure to companies in the media; retail (specialty, multiline, internet and catalog); hotels, restaurants and leisure; textiles, apparel and luxury goods; household durables; automobiles; auto components; distributors; leisure products; and diversified consumer services. Allows investors to take strategic or tactical positions at a more targeted level than traditional style-based investing.
VCR – Vanguard Consumer Discretionary ETF. Seeks to track the performance of a benchmark index that measures the investment return of stocks in the consumer discretionary sector. Passively managed, using a full-replication strategy when possible and a sampling strategy if regulatory constraints dictate. Includes stocks of companies that manufacture products and provide services that consumers purchase on a discretionary basis.
IYC – The iShares U.S. Consumer Services ETF seeks to track the investment results of an index composed of U.S. equities in the consumer services sector. Exposure to U.S. companies that distribute food, drugs, general retail items, and media. Targeted access to domestic consumer services stocks. Use to express a sector view.
PEJ – The Invesco Dynamic Leisure and Entertainment ETF (Fund) is based on the Dynamic Leisure & Entertainment Intellidex℠ Index (Intellidex Index). The Fund will normally invest at least 90% of its total assets in common stocks that comprise the Index. The Intellidex Index is designed to provide capital appreciation by thoroughly evaluating companies based on a variety of investment merit criteria, including: price momentum, earnings momentum, quality, management action, and value. The Underlying Intellidex Index is comprised of common stocks of 30 US leisure and entertainment companies. These are companies that are principally engaged in the design, production or distribution of goods or services in the leisure and entertainment industries. The Fund and the Index are rebalanced and reconstituted quarterly in February, May, August and November.
The Consumer Cyclical sector has treated investors very well over the last 5-, 10-, 15- and 19-year periods. I believe this is an investable asset class with a positive mathematical expectation based on historical performance. I think investors will do well to put a portion of their portfolio into any of the top 3 ETFs in this sector.
Thank you for taking time to read this article. If you found it useful, please share it with a friend.
Respectfully yours, Micah McDonald, aka the Deep Value ETF Accumulator
Disclosure: We own shares of XLY and intend to buy more shares in the future. I am not a professional investment advisor. Please perform your own due diligence or seek assistance from a Registered Investment Advisor prior to investing in any fund mentioned in this article.