Tesla's 18.97% Weight in XLY Explains Why It Beat VCR by 9 Points in Five Years

VCR and XLY both target US consumer discretionary equities and both hold Amazon and Tesla as major positions. XLY tracks a narrower index of about 50 S&P 500 consumer discretionary stocks, creating high concentration in mega-cap names. Amazon represents 23.53% and Tesla 18.97% of XLY, with the top three holdings totaling 50.44%. VCR tracks a broader MSCI consumer discretionary index with roughly 300 stocks that extend into mid- and small-caps, diluting Amazon and Tesla exposure while adding homebuilders, auto parts retailers, and specialty consumer brands. Tesla’s recent strength affects XLY more due to higher weighting. Over five years XLY outperformed, while over ten years VCR led, reflecting the benefit of broader participation over longer periods.

"XLY tracks the Consumer Discretionary Select Sector Index, a roughly 50-stock slice limited to S&P 500 constituents. That narrow universe forces concentration. Amazon sits at 23.53% of the fund and Tesla at 18.97%, a combined 42.50% in two names, with the top three holdings totaling 50.44%. XLY bets that mega-cap discretionary leaders compound faster than the rest of the sector."

"VCR tracks the MSCI US Investable Market Consumer Discretionary 25/50 Index, a basket of roughly 300 stocks reaching into mid- and small-caps. Amazon and Tesla anchor the top, but VCR dilutes them across homebuilders, auto parts retailers, and specialty consumer brands that XLY cannot touch. XLY is a bet on a handful of stocks; VCR is a bet on the sector."

"Tesla is the swing factor. The stock is up 26.35% over the past month and 33.29% over the past year, even after a 0.99% year-to-date dip. That move lands harder on XLY's 18.97% weighting than on VCR's diluted exposure. Over five years, XLY returned 44.8% against VCR's 35.8%, a gap driven largely by Tesla and Amazon outpacing the broader sector."

"Over ten years the order flips: VCR returned 261.29% versus XLY's 237.79%, when broader mid-cap participation rewarded VCR's wider net. One-year returns are nearly identical: 11.15% for XLY, 10.13% for VCR. Fees are essentially a wash. Motor vehicle spending rose from $713.3 billion in January 2026 to $780.9 billion in March, a tailwind that benefits both funds but lands disproportionately on XLY through Tesla."

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