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VB vs. XLK: What’s The Difference?

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.

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Summary

VBXLK
NameVanguard Small-Cap Index Fund ETF SharesTechnology Select Sector SPDR Fund
CategorySmall BlendTechnology
IssuerVanguardSPDR State Street Global Advisors
AUM137.72B42.3B
Avg. Return14.25%20.02%
Div. Yield1.14%0.73%
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 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%).

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Fund Composition

Industry Exposure

VB vs. XLK - Industry Exposure

VBXLK
Technology16.85%87.54%
Industrials16.11%1.75%
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%10.71%
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 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%).

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%.

XLK - Holdings

XLK HoldingsWeight
Apple Inc21.45%
Microsoft Corp20.37%
NVIDIA Corp4.98%
Visa Inc Class A3.95%
PayPal Holdings Inc3.42%
Mastercard Inc A3.19%
Adobe Inc2.8%
Salesforce.com Inc2.26%
Intel Corp2.26%
Cisco Systems Inc2.23%

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%.

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Risk Analysis

VBXLK
Mean Return1.151.7
R-squared85.0373.56
Std. Deviation17.8215.58
Alpha-4.0210.43
Beta1.210.95
Sharpe Ratio0.741.27
Treynor Ratio10.1521.44

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.

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Performance

Annual Returns

VB vs. XLK - Annual Returns

YearVBXLK
202019.08%43.67%
201927.37%49.97%
2018-9.3%-1.56%
201716.24%34.27%
201618.31%14.81%
2015-3.65%5.62%
20147.51%17.75%
201337.8%25.98%
201218.22%15.47%
2011-2.68%2.69%
201027.89%11.6%

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.

Portfolio Growth

VB vs. XLK - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
VB$10,000$39,73414.25%
XLK$10,000$67,79020.02%

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.


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