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VB vs. XLF: What’s The Difference?

The Vanguard Small-Cap Index Fund ETF Shares (VB) and the Financial Select Sector SPDR Fund (XLF) are both among the Top 100 ETFs. VB is a Vanguard Small Blend fund and XLF is a SPDR State Street Global Advisors Financial fund. So, what’s the difference between VB and XLF? And which fund is better?

The expense ratio of VB is 0.07 percentage points lower than XLF’s (0.05% vs. 0.12%). VB also has a higher exposure to the technology sector and a lower standard deviation. Overall, VB has provided higher returns than XLF over the past ten years.

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

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Summary

VBXLF
NameVanguard Small-Cap Index Fund ETF SharesFinancial Select Sector SPDR Fund
CategorySmall BlendFinancial
IssuerVanguardSPDR State Street Global Advisors
AUM137.72B40.81B
Avg. Return14.25%12.17%
Div. Yield1.14%1.57%
Expense Ratio0.05%0.12%

The Vanguard Small-Cap Index Fund ETF Shares (VB) is a Small Blend fund that is issued by Vanguard. It currently has 137.72B total assets under management and has yielded an average annual return of 14.25% over the past 10 years. The fund has a dividend yield of 1.14% with an expense ratio of 0.05%.

The Financial Select Sector SPDR Fund (XLF) is a Financial fund that is issued by SPDR State Street Global Advisors. It currently has 40.81B total assets under management and has yielded an average annual return of 12.17% over the past 10 years. The fund has a dividend yield of 1.57% with an expense ratio of 0.12%.

VB’s dividend yield is 0.43% lower than that of XLF (1.14% vs. 1.57%). Also, VB yielded on average 2.09% more per year over the past decade (14.25% vs. 12.17%). The expense ratio of VB is 0.07 percentage points lower than XLF’s (0.05% vs. 0.12%).

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Fund Composition

Industry Exposure

VB vs. XLF - Industry Exposure

VBXLF
Technology16.85%0.0%
Industrials16.11%0.0%
Energy3.67%0.0%
Communication Services2.4%0.0%
Utilities2.19%0.0%
Healthcare14.34%0.0%
Consumer Defensive4.14%0.0%
Real Estate9.56%0.0%
Financial Services13.06%100.0%
Consumer Cyclical13.03%0.0%
Basic Materials4.63%0.0%

The Vanguard Small-Cap Index Fund ETF Shares (VB) has the most exposure to the Technology sector at 16.85%. This is followed by Industrials and Healthcare at 16.11% and 14.34% respectively. Communication Services (2.4%), Energy (3.67%), and Consumer Defensive (4.14%) only make up 10.21% of the fund’s total assets.

VB’s mid-section with moderate exposure is comprised of Basic Materials, Real Estate, Consumer Cyclical, Financial Services, and Healthcare stocks at 4.63%, 9.56%, 13.03%, 13.06%, and 14.34%.

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

XLF’s mid-section with moderate exposure is comprised of Healthcare, Utilities, Communication Services, Energy, and Industrials stocks at 0.0%, 0.0%, 0.0%, 0.0%, and 0.0%.

VB is 16.85% more exposed to the Technology sector than XLF (16.85% vs 0.0%). VB’s exposure to Industrials and Healthcare stocks is 16.11% higher and 14.34% higher respectively (16.11% vs. 0.0% and 14.34% vs. 0.0%). In total, Communication Services, Energy, and Consumer Defensive also make up 10.21% more of the fund’s holdings compared to XLF (10.21% vs. 0.00%).

Holdings

VB - Holdings

VB HoldingsWeight
Charles River Laboratories International Inc0.34%
Pool Corp0.32%
Bio-Techne Corp0.32%
Avantor Inc0.32%
PerkinElmer Inc0.31%
Diamondback Energy Inc0.31%
VICI Properties Inc Ordinary Shares0.3%
IDEX Corp0.3%
Entegris Inc0.3%
Novavax Inc0.29%

VB’s Top Holdings are Charles River Laboratories International Inc, Pool Corp, Bio-Techne Corp, Avantor Inc, and PerkinElmer Inc at 0.34%, 0.32%, 0.32%, 0.32%, and 0.31%.

Diamondback Energy Inc (0.31%), VICI Properties Inc Ordinary Shares (0.3%), and IDEX Corp (0.3%) have a slightly smaller but still significant weight. Entegris Inc and Novavax Inc are also represented in the VB’s holdings at 0.3% and 0.29%.

XLF - Holdings

XLF HoldingsWeight
Berkshire Hathaway Inc Class B12.83%
JPMorgan Chase & Co11.47%
Bank of America Corp7.57%
Wells Fargo & Co4.56%
Citigroup Inc3.56%
Morgan Stanley3.32%
Goldman Sachs Group Inc3.15%
BlackRock Inc3.02%
Charles Schwab Corp2.66%
American Express Co2.62%

XLF’s Top Holdings are Berkshire Hathaway Inc Class B, JPMorgan Chase & Co, Bank of America Corp, Wells Fargo & Co, and Citigroup Inc at 12.83%, 11.47%, 7.57%, 4.56%, and 3.56%.

Morgan Stanley (3.32%), Goldman Sachs Group Inc (3.15%), and BlackRock Inc (3.02%) have a slightly smaller but still significant weight. Charles Schwab Corp and American Express Co are also represented in the XLF’s holdings at 2.66% and 2.62%.

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Risk Analysis

VBXLF
Mean Return1.151.21
R-squared85.0373.26
Std. Deviation17.8218.86
Alpha-4.022.63
Beta1.211.15
Sharpe Ratio0.740.74
Treynor Ratio10.1511.25

The Vanguard Small-Cap Index Fund ETF Shares (VB) has a Treynor Ratio of 10.15 with a Sharpe Ratio of 0.74 and a Beta of 1.21. Its Mean Return is 1.15 while VB’s Alpha is -4.02. Furthermore, the fund has a Standard Deviation of 17.82 and a R-squared of 85.03.

The Financial Select Sector SPDR Fund (XLF) has a Mean Return of 1.21 with a R-squared of 73.26 and a Treynor Ratio of 11.25. Its Sharpe Ratio is 0.74 while XLF’s Alpha is 2.63. Furthermore, the fund has a Beta of 1.15 and a Standard Deviation of 18.86.

VB’s Mean Return is 0.06 points lower than that of XLF and its R-squared is 11.77 points higher. With a Standard Deviation of 17.82, VB is slightly less volatile than XLF. The Alpha and Beta of VB are 6.65 points lower and 0.06 points higher than XLF’s Alpha and Beta.

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Performance

Annual Returns

VB vs. XLF - Annual Returns

YearVBXLF
202019.08%-1.68%
201927.37%31.88%
2018-9.3%-13.09%
201716.24%22.03%
201618.31%22.55%
2015-3.65%-1.6%
20147.51%15.02%
201337.8%35.37%
201218.22%28.53%
2011-2.68%-17.16%
201027.89%11.97%

VB had its best year in 2013 with an annual return of 37.8%. VB’s worst year over the past decade yielded -9.3% and occurred in 2018. In most years the Vanguard Small-Cap Index Fund ETF Shares provided moderate returns such as in 2017, 2012, and 2016 where annual returns amounted to 16.24%, 18.22%, and 18.31% respectively.

The year 2013 was the strongest year for XLF, returning 35.37% on an annual basis. The poorest year for XLF in the last ten years was 2011, with a yield of -17.16%. Most years the Financial Select Sector SPDR Fund has given investors modest returns, such as in 2010, 2014, and 2017, when gains were 11.97%, 15.02%, and 22.03% respectively.

Portfolio Growth

VB vs. XLF - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
VB$10,000$39,73414.25%
XLF$10,000$30,78212.17%

A $10,000 investment in VB would have resulted in a final balance of $39,734. This is a profit of $29,734 over 11 years and amounts to a compound annual growth rate (CAGR) of 14.25%.

With a $10,000 investment in XLF, the end total would have been $30,782. This equates to a $20,782 profit over 11 years and a compound annual growth rate (CAGR) of 12.17%.

VB’s CAGR is 2.09 percentage points higher than that of XLF and as a result, would have yielded $8,952 more on a $10,000 investment. Thus, VB outperformed XLF by 2.09% annually.


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