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VBR vs. XLY: What’s The Difference?

The Vanguard Small-Cap Value Index Fund ETF Shares (VBR) and the Consumer Discretionary Select Sector SPDR Fund (XLY) are both among the Top 100 ETFs. VBR is a Vanguard Small Value fund and XLY is a SPDR State Street Global Advisors Consumer Cyclical fund. So, what’s the difference between VBR and XLY? And which fund is better?

The expense ratio of VBR is 0.05 percentage points lower than XLY’s (0.07% vs. 0.12%). VBR also has a higher exposure to the financial services sector and a higher standard deviation. Overall, VBR has provided lower returns than XLY over the past 11 years.

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

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Summary

VBRXLY
NameVanguard Small-Cap Value Index Fund ETF SharesConsumer Discretionary Select Sector SPDR Fund
CategorySmall ValueConsumer Cyclical
IssuerVanguardSPDR State Street Global Advisors
AUM48.08B20.21B
Avg. Return12.28%18.86%
Div. Yield1.6%0.63%
Expense Ratio0.07%0.12%

The Vanguard Small-Cap Value Index Fund ETF Shares (VBR) is a Small Value fund that is issued by Vanguard. It currently has 48.08B total assets under management and has yielded an average annual return of 12.28% over the past 10 years. The fund has a dividend yield of 1.6% with an expense ratio of 0.07%.

The Consumer Discretionary Select Sector SPDR Fund (XLY) is a Consumer Cyclical fund that is issued by SPDR State Street Global Advisors. It currently has 20.21B total assets under management and has yielded an average annual return of 18.86% over the past 10 years. The fund has a dividend yield of 0.63% with an expense ratio of 0.12%.

VBR’s dividend yield is 0.97% higher than that of XLY (1.6% vs. 0.63%). Also, VBR yielded on average 6.58% less per year over the past decade (12.28% vs. 18.86%). The expense ratio of VBR is 0.05 percentage points lower than XLY’s (0.07% vs. 0.12%).

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Fund Composition

Industry Exposure

VBR vs. XLY - Industry Exposure

VBRXLY
Technology8.39%0.57%
Industrials18.44%0.0%
Energy5.15%0.0%
Communication Services1.77%0.0%
Utilities3.65%0.0%
Healthcare7.16%0.0%
Consumer Defensive4.36%5.34%
Real Estate10.92%0.0%
Financial Services20.04%0.0%
Consumer Cyclical13.82%94.1%
Basic Materials6.31%0.0%

The Vanguard Small-Cap Value Index Fund ETF Shares (VBR) has the most exposure to the Financial Services sector at 20.04%. This is followed by Industrials and Consumer Cyclical at 18.44% and 13.82% respectively. Utilities (3.65%), Consumer Defensive (4.36%), and Energy (5.15%) only make up 13.16% of the fund’s total assets.

VBR’s mid-section with moderate exposure is comprised of Basic Materials, Healthcare, Technology, Real Estate, and Consumer Cyclical stocks at 6.31%, 7.16%, 8.39%, 10.92%, and 13.82%.

The Consumer Discretionary Select Sector SPDR Fund (XLY) has the most exposure to the Consumer Cyclical sector at 94.1%. This is followed by Consumer Defensive and Technology at 5.34% and 0.57% respectively. Financial Services (0.0%), Real Estate (0.0%), and Healthcare (0.0%) only make up 0.00% of the fund’s total assets.

XLY’s mid-section with moderate exposure is comprised of Utilities, Communication Services, Energy, Industrials, and Technology stocks at 0.0%, 0.0%, 0.0%, 0.0%, and 0.57%.

VBR is 20.04% more exposed to the Financial Services sector than XLY (20.04% vs 0.0%). VBR’s exposure to Industrials and Consumer Cyclical stocks is 18.44% higher and 80.28% lower respectively (18.44% vs. 0.0% and 13.82% vs. 94.1%). In total, Utilities, Consumer Defensive, and Energy also make up 7.82% more of the fund’s holdings compared to XLY (13.16% vs. 5.34%).

Holdings

VBR - Holdings

VBR HoldingsWeight
Diamondback Energy Inc0.55%
VICI Properties Inc Ordinary Shares0.54%
IDEX Corp0.54%
Nuance Communications Inc0.5%
Molina Healthcare Inc0.48%
Signature Bank0.46%
Novavax Inc0.44%
Howmet Aerospace Inc0.44%
Apollo Global Management Inc Class A0.42%
Brown & Brown Inc0.41%

VBR’s Top Holdings are Diamondback Energy Inc, VICI Properties Inc Ordinary Shares, IDEX Corp, Nuance Communications Inc, and Molina Healthcare Inc at 0.55%, 0.54%, 0.54%, 0.5%, and 0.48%.

Signature Bank (0.46%), Novavax Inc (0.44%), and Howmet Aerospace Inc (0.44%) have a slightly smaller but still significant weight. Apollo Global Management Inc Class A and Brown & Brown Inc are also represented in the VBR’s holdings at 0.42% and 0.41%.

XLY - Holdings

XLY HoldingsWeight
Amazon.com Inc22.9%
Tesla Inc13.5%
The Home Depot Inc8.74%
McDonald’s Corp4.5%
Nike Inc B4.45%
Lowe’s Companies Inc3.58%
Starbucks Corp3.44%
Target Corp3.12%
Booking Holdings Inc2.35%
TJX Companies Inc2.12%

XLY’s Top Holdings are Amazon.com Inc, Tesla Inc, The Home Depot Inc, McDonald’s Corp, and Nike Inc B at 22.9%, 13.5%, 8.74%, 4.5%, and 4.45%.

Lowe’s Companies Inc (3.58%), Starbucks Corp (3.44%), and Target Corp (3.12%) have a slightly smaller but still significant weight. Booking Holdings Inc and TJX Companies Inc are also represented in the XLY’s holdings at 2.35% and 2.12%.

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Risk Analysis

VBRXLY
Mean Return1.081.47
R-squared82.280.84
Std. Deviation18.3715.97
Alpha-5.096.96
Beta1.231.02
Sharpe Ratio0.671.06
Treynor Ratio9.1516.69

The Vanguard Small-Cap Value Index Fund ETF Shares (VBR) has a Sharpe Ratio of 0.67 with a Treynor Ratio of 9.15 and a Mean Return of 1.08. Its Standard Deviation is 18.37 while VBR’s Alpha is -5.09. Furthermore, the fund has a R-squared of 82.2 and a Beta of 1.23.

The Consumer Discretionary Select Sector SPDR Fund (XLY) has a Treynor Ratio of 16.69 with a R-squared of 80.84 and a Alpha of 6.96. Its Sharpe Ratio is 1.06 while XLY’s Standard Deviation is 15.97. Furthermore, the fund has a Beta of 1.02 and a Mean Return of 1.47.

VBR’s Mean Return is 0.39 points lower than that of XLY and its R-squared is 1.36 points higher. With a Standard Deviation of 18.37, VBR is slightly more volatile than XLY. The Alpha and Beta of VBR are 12.05 points lower and 0.21 points higher than XLY’s Alpha and Beta.

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Performance

Annual Returns

VBR vs. XLY - Annual Returns

YearVBRXLY
20205.82%29.66%
201922.76%28.43%
2018-12.22%1.66%
201711.79%22.77%
201624.8%5.87%
2015-4.67%9.93%
201410.55%9.49%
201336.57%42.74%
201218.78%23.6%
2011-4.05%5.98%
201024.97%27.36%

VBR had its best year in 2013 with an annual return of 36.57%. VBR’s worst year over the past decade yielded -12.22% and occurred in 2018. In most years the Vanguard Small-Cap Value Index Fund ETF Shares provided moderate returns such as in 2014, 2017, and 2012 where annual returns amounted to 10.55%, 11.79%, and 18.78% respectively.

The year 2013 was the strongest year for XLY, returning 42.74% on an annual basis. The poorest year for XLY in the last ten years was 2018, with a yield of 1.66%. Most years the Consumer Discretionary Select Sector SPDR Fund has given investors modest returns, such as in 2015, 2017, and 2012, when gains were 9.93%, 22.77%, and 23.6% respectively.

Portfolio Growth

VBR vs. XLY - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
VBR$10,000$32,61112.28%
XLY$10,000$63,06618.86%

A $10,000 investment in VBR would have resulted in a final balance of $32,611. This is a profit of $22,611 over 11 years and amounts to a compound annual growth rate (CAGR) of 12.28%.

With a $10,000 investment in XLY, the end total would have been $63,066. This equates to a $53,066 profit over 11 years and a compound annual growth rate (CAGR) of 18.86%.

VBR’s CAGR is 6.58 percentage points lower than that of XLY and as a result, would have yielded $30,455 less on a $10,000 investment. Thus, VBR performed worse than XLY by 6.58% annually.


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