The Vanguard Small-Cap Index Fund ETF Shares (VB) and the Industrial Select Sector SPDR Fund (XLI) are both among the Top 100 ETFs. VB is a Vanguard Small Blend fund and XLI is a SPDR State Street Global Advisors Industrials fund. So, what’s the difference between VB and XLI? And which fund is better?
The expense ratio of VB is 0.07 percentage points lower than XLI’s (0.05% vs. 0.12%). VB also has a higher exposure to the technology sector and a higher standard deviation. Overall, VB has provided lower returns than XLI over the past ten years.
In this article, we’ll compare VB vs. XLI. We’ll look at annual returns and portfolio growth, as well as at their fund composition and holdings. Moreover, I’ll also discuss VB’s and XLI’s industry exposure, performance, and risk metrics and examine how these affect their overall returns.
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Summary
| VB | XLI | |
| Name | Vanguard Small-Cap Index Fund ETF Shares | Industrial Select Sector SPDR Fund |
| Category | Small Blend | Industrials |
| Issuer | Vanguard | SPDR State Street Global Advisors |
| AUM | 137.72B | 19.33B |
| Avg. Return | 14.25% | 14.44% |
| Div. Yield | 1.14% | 1.25% |
| Expense Ratio | 0.05% | 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 Industrial Select Sector SPDR Fund (XLI) is a Industrials fund that is issued by SPDR State Street Global Advisors. It currently has 19.33B total assets under management and has yielded an average annual return of 14.44% over the past 10 years. The fund has a dividend yield of 1.25% with an expense ratio of 0.12%.
VB’s dividend yield is 0.11% lower than that of XLI (1.14% vs. 1.25%). Also, VB yielded on average 0.19% less per year over the past decade (14.25% vs. 14.44%). The expense ratio of VB is 0.07 percentage points lower than XLI’s (0.05% vs. 0.12%).
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Fund Composition
Industry Exposure
| VB | XLI | |
| Technology | 16.85% | 1.82% |
| Industrials | 16.11% | 97.49% |
| Energy | 3.67% | 0.0% |
| Communication Services | 2.4% | 0.0% |
| Utilities | 2.19% | 0.0% |
| Healthcare | 14.34% | 0.0% |
| Consumer Defensive | 4.14% | 0.0% |
| Real Estate | 9.56% | 0.0% |
| Financial Services | 13.06% | 0.0% |
| Consumer Cyclical | 13.03% | 0.69% |
| Basic Materials | 4.63% | 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 Industrial Select Sector SPDR Fund (XLI) has the most exposure to the Industrials sector at 97.49%. This is followed by Technology and Consumer Cyclical at 1.82% and 0.69% respectively. Financial Services (0.0%), Real Estate (0.0%), and Consumer Defensive (0.0%) only make up 0.00% of the fund’s total assets.
XLI’s mid-section with moderate exposure is comprised of Healthcare, Utilities, Communication Services, Energy, and Consumer Cyclical stocks at 0.0%, 0.0%, 0.0%, 0.0%, and 0.69%.
VB is 15.03% more exposed to the Technology sector than XLI (16.85% vs 1.82%). VB’s exposure to Industrials and Healthcare stocks is 81.38% lower and 14.34% higher respectively (16.11% vs. 97.49% 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 XLI (10.21% vs. 0.00%).
Holdings
| VB Holdings | Weight |
| Charles River Laboratories International Inc | 0.34% |
| Pool Corp | 0.32% |
| Bio-Techne Corp | 0.32% |
| Avantor Inc | 0.32% |
| PerkinElmer Inc | 0.31% |
| Diamondback Energy Inc | 0.31% |
| VICI Properties Inc Ordinary Shares | 0.3% |
| IDEX Corp | 0.3% |
| Entegris Inc | 0.3% |
| Novavax Inc | 0.29% |
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%.
| XLI Holdings | Weight |
| Honeywell International Inc | 4.9% |
| United Parcel Service Inc Class B | 4.84% |
| Union Pacific Corp | 4.7% |
| Boeing Co | 4.24% |
| Raytheon Technologies Corp | 4.16% |
| Caterpillar Inc | 3.84% |
| General Electric Co | 3.8% |
| 3M Co | 3.7% |
| Deere & Co | 3.54% |
| Lockheed Martin Corp | 2.98% |
XLI’s Top Holdings are Honeywell International Inc, United Parcel Service Inc Class B, Union Pacific Corp, Boeing Co, and Raytheon Technologies Corp at 4.9%, 4.84%, 4.7%, 4.24%, and 4.16%.
Caterpillar Inc (3.84%), General Electric Co (3.8%), and 3M Co (3.7%) have a slightly smaller but still significant weight. Deere & Co and Lockheed Martin Corp are also represented in the XLI’s holdings at 3.54% and 2.98%.
Risk Analysis
| VB | XLI | |
| Mean Return | 1.15 | 1.14 |
| R-squared | 85.03 | 78.97 |
| Std. Deviation | 17.82 | 17.13 |
| Alpha | -4.02 | 2.38 |
| Beta | 1.21 | 1.08 |
| Sharpe Ratio | 0.74 | 0.76 |
| Treynor Ratio | 10.15 | 11.34 |
The Vanguard Small-Cap Index Fund ETF Shares (VB) has a Treynor Ratio of 10.15 with a R-squared of 85.03 and a Standard Deviation of 17.82. Its Mean Return is 1.15 while VB’s Alpha is -4.02. Furthermore, the fund has a Beta of 1.21 and a Sharpe Ratio of 0.74.
The Industrial Select Sector SPDR Fund (XLI) has a Alpha of 2.38 with a Treynor Ratio of 11.34 and a Beta of 1.08. Its Standard Deviation is 17.13 while XLI’s R-squared is 78.97. Furthermore, the fund has a Mean Return of 1.14 and a Sharpe Ratio of 0.76.
VB’s Mean Return is 0.01 points higher than that of XLI and its R-squared is 6.06 points higher. With a Standard Deviation of 17.82, VB is slightly more volatile than XLI. The Alpha and Beta of VB are 6.40 points lower and 0.13 points higher than XLI’s Alpha and Beta.
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Performance
Annual Returns
| Year | VB | XLI |
| 2020 | 19.08% | 11.0% |
| 2019 | 27.37% | 29.11% |
| 2018 | -9.3% | -13.1% |
| 2017 | 16.24% | 23.85% |
| 2016 | 18.31% | 19.93% |
| 2015 | -3.65% | -4.27% |
| 2014 | 7.51% | 10.44% |
| 2013 | 37.8% | 40.44% |
| 2012 | 18.22% | 14.86% |
| 2011 | -2.68% | -1.01% |
| 2010 | 27.89% | 27.62% |
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 XLI, returning 40.44% on an annual basis. The poorest year for XLI in the last ten years was 2018, with a yield of -13.1%. Most years the Industrial Select Sector SPDR Fund has given investors modest returns, such as in 2020, 2012, and 2016, when gains were 11.0%, 14.86%, and 19.93% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| VB | $10,000 | $39,734 | 14.25% |
| XLI | $10,000 | $39,853 | 14.44% |
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 XLI, the end total would have been $39,853. This equates to a $29,853 profit over 11 years and a compound annual growth rate (CAGR) of 14.44%.
VB’s CAGR is 0.19 percentage points lower than that of XLI and as a result, would have yielded $119 less on a $10,000 investment. Thus, VB performed worse than XLI by 0.19% annually.
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