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VBK vs. XLC: What’s The Difference?

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

The expense ratio of VBK is 0.05 percentage points lower than XLC’s (0.07% vs. 0.12%). VBK also has a higher exposure to the technology sector and a higher standard deviation. Overall, VBK has provided lower returns than XLC over the past 2 years.

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

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Summary

VBKXLC
NameVanguard Small-Cap Growth Index Fund ETF SharesCommunication Services Select Sector SPDR Fund
CategorySmall GrowthCommunications
IssuerVanguardSPDR State Street Global Advisors
AUM37.89B14.09B
Avg. Return16.53%29.04%
Div. Yield0.45%0.62%
Expense Ratio0.07%0.12%

The Vanguard Small-Cap Growth Index Fund ETF Shares (VBK) is a Small Growth fund that is issued by Vanguard. It currently has 37.89B total assets under management and has yielded an average annual return of 16.53% over the past 10 years. The fund has a dividend yield of 0.45% with an expense ratio of 0.07%.

The Communication Services Select Sector SPDR Fund (XLC) is a Communications fund that is issued by SPDR State Street Global Advisors. It currently has 14.09B total assets under management and has yielded an average annual return of 29.04% over the past 10 years. The fund has a dividend yield of 0.62% with an expense ratio of 0.12%.

VBK’s dividend yield is 0.17% lower than that of XLC (0.45% vs. 0.62%). Also, VBK yielded on average 12.51% less per year over the past decade (16.53% vs. 29.04%). The expense ratio of VBK is 0.05 percentage points lower than XLC’s (0.07% vs. 0.12%).

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Fund Composition

Industry Exposure

VBK vs. XLC - Industry Exposure

VBKXLC
Technology27.87%0.0%
Industrials13.19%0.0%
Energy1.77%0.0%
Communication Services3.24%100.0%
Utilities0.32%0.0%
Healthcare23.24%0.0%
Consumer Defensive3.83%0.0%
Real Estate7.87%0.0%
Financial Services4.05%0.0%
Consumer Cyclical12.13%0.0%
Basic Materials2.49%0.0%

The Vanguard Small-Cap Growth Index Fund ETF Shares (VBK) has the most exposure to the Technology sector at 27.87%. This is followed by Healthcare and Industrials at 23.24% and 13.19% respectively. Energy (1.77%), Basic Materials (2.49%), and Communication Services (3.24%) only make up 7.50% of the fund’s total assets.

VBK’s mid-section with moderate exposure is comprised of Consumer Defensive, Financial Services, Real Estate, Consumer Cyclical, and Industrials stocks at 3.83%, 4.05%, 7.87%, 12.13%, and 13.19%.

The Communication Services Select Sector SPDR Fund (XLC) has the most exposure to the Communication Services 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.

XLC’s mid-section with moderate exposure is comprised of Consumer Defensive, Healthcare, Utilities, Energy, and Industrials stocks at 0.0%, 0.0%, 0.0%, 0.0%, and 0.0%.

VBK is 27.87% more exposed to the Technology sector than XLC (27.87% vs 0.0%). VBK’s exposure to Healthcare and Industrials stocks is 23.24% higher and 13.19% higher respectively (23.24% vs. 0.0% and 13.19% vs. 0.0%). In total, Energy, Basic Materials, and Communication Services also make up 92.50% less of the fund’s holdings compared to XLC (7.50% vs. 100.00%).

Holdings

VBK - Holdings

VBK HoldingsWeight
Charles River Laboratories International Inc0.78%
Pool Corp0.73%
Bio-Techne Corp0.73%
Avantor Inc0.73%
PerkinElmer Inc0.72%
Entegris Inc0.7%
PTC Inc0.62%
Fair Isaac Corp0.57%
Bill.com Holdings Inc Ordinary Shares0.56%
Avalara Inc0.55%

VBK’s Top Holdings are Charles River Laboratories International Inc, Pool Corp, Bio-Techne Corp, Avantor Inc, and PerkinElmer Inc at 0.78%, 0.73%, 0.73%, 0.73%, and 0.72%.

Entegris Inc (0.7%), PTC Inc (0.62%), and Fair Isaac Corp (0.57%) have a slightly smaller but still significant weight. Bill.com Holdings Inc Ordinary Shares and Avalara Inc are also represented in the VBK’s holdings at 0.56% and 0.55%.

XLC - Holdings

XLC HoldingsWeight
Facebook Inc A23.75%
Alphabet Inc A11.49%
Alphabet Inc Class C11.16%
Netflix Inc4.78%
Charter Communications Inc A4.65%
Comcast Corp Class A4.44%
T-Mobile US Inc4.41%
The Walt Disney Co4.39%
AT&T Inc4.35%
Verizon Communications Inc4.33%

XLC’s Top Holdings are Facebook Inc A, Alphabet Inc A, Alphabet Inc Class C, Netflix Inc, and Charter Communications Inc A at 23.75%, 11.49%, 11.16%, 4.78%, and 4.65%.

Comcast Corp Class A (4.44%), T-Mobile US Inc (4.41%), and The Walt Disney Co (4.39%) have a slightly smaller but still significant weight. AT&T Inc and Verizon Communications Inc are also represented in the XLC’s holdings at 4.35% and 4.33%.

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Risk Analysis

VBKXLC
Mean Return1.220
R-squared80.560
Std. Deviation17.950
Alpha-2.810
Beta1.180
Sharpe Ratio0.780
Treynor Ratio11.180

The Vanguard Small-Cap Growth Index Fund ETF Shares (VBK) has a Alpha of -2.81 with a Standard Deviation of 17.95 and a R-squared of 80.56. Its Beta is 1.18 while VBK’s Sharpe Ratio is 0.78. Furthermore, the fund has a Treynor Ratio of 11.18 and a Mean Return of 1.22.

The Communication Services Select Sector SPDR Fund (XLC) has a Standard Deviation of 0 with a Mean Return of 0 and a Alpha of 0. Its Beta is 0 while XLC’s Sharpe Ratio is 0. Furthermore, the fund has a R-squared of 0 and a Treynor Ratio of 0.

VBK’s Mean Return is 1.22 points higher than that of XLC and its R-squared is 80.56 points higher. With a Standard Deviation of 17.95, VBK is slightly more volatile than XLC. The Alpha and Beta of VBK are 2.81 points lower and 1.18 points higher than XLC’s Alpha and Beta.

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Performance

Annual Returns

VBK vs. XLC - Annual Returns

YearVBKXLC
202035.29%26.85%
201932.75%31.22%
2018-5.68%0.0%
201721.9%0.0%
201610.74%0.0%
2015-2.51%0.0%
20144.02%0.0%
201338.18%0.0%
201217.67%0.0%
2011-1.43%0.0%
201030.87%0.0%

VBK had its best year in 2013 with an annual return of 38.18%. VBK’s worst year over the past decade yielded -5.68% and occurred in 2018. In most years the Vanguard Small-Cap Growth Index Fund ETF Shares provided moderate returns such as in 2016, 2012, and 2017 where annual returns amounted to 10.74%, 17.67%, and 21.9% respectively.

The year 2019 was the strongest year for XLC, returning 31.22% on an annual basis. The poorest year for XLC in the last ten years was 2018, with a yield of 0.0%. Most years the Communication Services Select Sector SPDR Fund has given investors modest returns, such as in 2014, 2013, and 2012, when gains were 0.0%, 0.0%, and 0.0% respectively.

Portfolio Growth

VBK vs. XLC - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
VBK$10,000$17,95916.53%
XLC$10,000$16,64529.04%

A $10,000 investment in VBK would have resulted in a final balance of $17,959. This is a profit of $7,959 over 2 years and amounts to a compound annual growth rate (CAGR) of 16.53%.

With a $10,000 investment in XLC, the end total would have been $16,645. This equates to a $6,645 profit over 2 years and a compound annual growth rate (CAGR) of 29.04%.

VBK’s CAGR is 12.51 percentage points lower than that of XLC and as a result, would have yielded $1,314 more on a $10,000 investment. Thus, VBK performed worse than XLC by 12.51% annually.


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