The Vanguard Small-Cap Index Fund ETF Shares (VB) and the Technology Select Sector SPDR Fund (XLK) are both among the Top 100 ETFs. VB is a Vanguard Small Blend fund and XLK is a SPDR State Street Global Advisors Technology fund. So, what’s the difference between VB and XLK? And which fund is better?
The expense ratio of VB is 0.07 percentage points lower than XLK’s (0.05% vs. 0.12%). VB also has a lower exposure to the technology sector and a higher standard deviation. Overall, VB has provided lower returns than XLK over the past ten years.
In this article, we’ll compare VB vs. XLK. We’ll look at fund composition and holdings, as well as at their annual returns and industry exposure. Moreover, I’ll also discuss VB’s and XLK’s risk metrics, portfolio growth, and performance and examine how these affect their overall returns.
|Name||Vanguard Small-Cap Index Fund ETF Shares||Technology Select Sector SPDR Fund|
|Issuer||Vanguard||SPDR State Street Global Advisors|
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 Technology Select Sector SPDR Fund (XLK) is a Technology fund that is issued by SPDR State Street Global Advisors. It currently has 42.3B total assets under management and has yielded an average annual return of 20.02% over the past 10 years. The fund has a dividend yield of 0.73% with an expense ratio of 0.12%.
VB’s dividend yield is 0.41% higher than that of XLK (1.14% vs. 0.73%). Also, VB yielded on average 5.77% less per year over the past decade (14.25% vs. 20.02%). The expense ratio of VB is 0.07 percentage points lower than XLK’s (0.05% vs. 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).
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 Technology Select Sector SPDR Fund (XLK) has the most exposure to the Technology sector at 87.54%. This is followed by Financial Services and Industrials at 10.71% and 1.75% 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.
XLK’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 1.75%.
VB is 70.69% less exposed to the Technology sector than XLK (16.85% vs 87.54%). VB’s exposure to Industrials and Healthcare stocks is 14.36% higher and 14.34% higher respectively (16.11% vs. 1.75% 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 XLK (10.21% vs. 0.00%).
|Charles River Laboratories International Inc||0.34%|
|Diamondback Energy Inc||0.31%|
|VICI Properties Inc Ordinary Shares||0.3%|
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%.
|Visa Inc Class A||3.95%|
|PayPal Holdings Inc||3.42%|
|Mastercard Inc A||3.19%|
|Cisco Systems Inc||2.23%|
XLK’s Top Holdings are Apple Inc, Microsoft Corp, NVIDIA Corp, Visa Inc Class A, and PayPal Holdings Inc at 21.45%, 20.37%, 4.98%, 3.95%, and 3.42%.
Mastercard Inc A (3.19%), Adobe Inc (2.8%), and Salesforce.com Inc (2.26%) have a slightly smaller but still significant weight. Intel Corp and Cisco Systems Inc are also represented in the XLK’s holdings at 2.26% and 2.23%.
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).
The Vanguard Small-Cap Index Fund ETF Shares (VB) has a Treynor Ratio of 10.15 with a Mean Return of 1.15 and a R-squared of 85.03. Its Alpha is -4.02 while VB’s Standard Deviation is 17.82. Furthermore, the fund has a Sharpe Ratio of 0.74 and a Beta of 1.21.
The Technology Select Sector SPDR Fund (XLK) has a Sharpe Ratio of 1.27 with a Alpha of 10.43 and a Treynor Ratio of 21.44. Its Standard Deviation is 15.58 while XLK’s R-squared is 73.56. Furthermore, the fund has a Mean Return of 1.7 and a Beta of 0.95.
VB’s Mean Return is 0.55 points lower than that of XLK and its R-squared is 11.47 points higher. With a Standard Deviation of 17.82, VB is slightly more volatile than XLK. The Alpha and Beta of VB are 14.45 points lower and 0.26 points higher than XLK’s Alpha and Beta.
FYI: Another great way to get exposure to the real estate sector is by investing in real estate debt. Groundfloor offers fantastic short-term, high-yield bonds that can add diversification to your portfolio!
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 2019 was the strongest year for XLK, returning 49.97% on an annual basis. The poorest year for XLK in the last ten years was 2018, with a yield of -1.56%. Most years the Technology Select Sector SPDR Fund has given investors modest returns, such as in 2016, 2012, and 2014, when gains were 14.81%, 15.47%, and 17.75% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
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 XLK, the end total would have been $67,790. This equates to a $57,790 profit over 11 years and a compound annual growth rate (CAGR) of 20.02%.
VB’s CAGR is 5.77 percentage points lower than that of XLK and as a result, would have yielded $28,056 less on a $10,000 investment. Thus, VB performed worse than XLK by 5.77% annually.
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)Personal Capital is simply the best tool out there to track your net worth and plan for financial freedom. Just their retirement planner alone has become an invaluable tool to keep myself on track financially. Try it out, it's free!
2) 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!
3) 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!).
4) Groundfloor is another great way to get exposure to the real estate sector by investing in short-term, high-yield real estate debt. Current returns are >10% and you can get started with just $10.
5) If you are interested in startup investing, check out Mainvest. I've started allocating a small amount of assets to invest in and support small businesses. Return targets are between 10-25% and you can start with just $100!
To see all of my most up-to-date recommendations, check out the Recommended Tools section.