The Vanguard Small-Cap Index Fund ETF Shares (VB) and the Health Care Select Sector SPDR Fund (XLV) are both among the Top 100 ETFs. VB is a Vanguard Small Blend fund and XLV is a SPDR State Street Global Advisors Health fund. So, what’s the difference between VB and XLV? And which fund is better?
The expense ratio of VB is 0.07 percentage points lower than XLV’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 XLV over the past ten years.
In this article, we’ll compare VB vs. XLV. We’ll look at portfolio growth and risk metrics, as well as at their holdings and fund composition. Moreover, I’ll also discuss VB’s and XLV’s industry exposure, performance, and annual returns and examine how these affect their overall returns.
|Name||Vanguard Small-Cap Index Fund ETF Shares||Health Care 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 Health Care Select Sector SPDR Fund (XLV) is a Health fund that is issued by SPDR State Street Global Advisors. It currently has 27.88B total assets under management and has yielded an average annual return of 15.02% over the past 10 years. The fund has a dividend yield of 1.4% with an expense ratio of 0.12%.
VB’s dividend yield is 0.26% lower than that of XLV (1.14% vs. 1.4%). Also, VB yielded on average 0.77% less per year over the past decade (14.25% vs. 15.02%). The expense ratio of VB is 0.07 percentage points lower than XLV’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 Health Care Select Sector SPDR Fund (XLV) has the most exposure to the Healthcare sector at 100.0%. This is followed by Technology and Industrials at 0.0% and 0.0% respectively. Consumer Cyclical (0.0%), Financial Services (0.0%), and Real Estate (0.0%) only make up 0.00% of the fund’s total assets.
XLV’s mid-section with moderate exposure is comprised of Consumer Defensive, 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 XLV (16.85% vs 0.0%). VB’s exposure to Industrials and Healthcare stocks is 16.11% higher and 85.66% lower respectively (16.11% vs. 0.0% and 14.34% vs. 100.0%). In total, Communication Services, Energy, and Consumer Defensive also make up 10.21% more of the fund’s holdings compared to XLV (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%.
|Johnson & Johnson||9.19%|
|UnitedHealth Group Inc||8.01%|
|Thermo Fisher Scientific Inc||4.2%|
|Merck & Co Inc||4.17%|
|Eli Lilly and Co||3.87%|
XLV’s Top Holdings are Johnson & Johnson, UnitedHealth Group Inc, Pfizer Inc, Abbott Laboratories, and AbbVie Inc at 9.19%, 8.01%, 4.64%, 4.36%, and 4.21%.
Thermo Fisher Scientific Inc (4.2%), Merck & Co Inc (4.17%), and Eli Lilly and Co (3.87%) have a slightly smaller but still significant weight. Danaher Corp and Medtronic PLC are also represented in the XLV’s holdings at 3.61% and 3.54%.
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 Sharpe Ratio of 0.74 with a Beta of 1.21 and a Standard Deviation of 17.82. Its Alpha is -4.02 while VB’s Treynor Ratio is 10.15. Furthermore, the fund has a Mean Return of 1.15 and a R-squared of 85.03.
The Health Care Select Sector SPDR Fund (XLV) has a Standard Deviation of 12.94 with a R-squared of 58.19 and a Alpha of 7.75. Its Mean Return is 1.27 while XLV’s Treynor Ratio is 21.1. Furthermore, the fund has a Sharpe Ratio of 1.13 and a Beta of 0.7.
VB’s Mean Return is 0.12 points lower than that of XLV and its R-squared is 26.84 points higher. With a Standard Deviation of 17.82, VB is slightly more volatile than XLV. The Alpha and Beta of VB are 11.77 points lower and 0.51 points higher than XLV’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 2013 was the strongest year for XLV, returning 41.24% on an annual basis. The poorest year for XLV in the last ten years was 2016, with a yield of -2.83%. Most years the Health Care Select Sector SPDR Fund has given investors modest returns, such as in 2011, 2020, and 2012, when gains were 12.44%, 13.33%, and 17.56% 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 XLV, the end total would have been $44,147. This equates to a $34,147 profit over 11 years and a compound annual growth rate (CAGR) of 15.02%.
VB’s CAGR is 0.77 percentage points lower than that of XLV and as a result, would have yielded $4,413 less on a $10,000 investment. Thus, VB performed worse than XLV by 0.77% 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.