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VCIT vs. XLC: What’s The Difference?

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

The expense ratio of VCIT is 0.07 percentage points lower than XLC’s (0.05% vs. 0.12%). VCIT is mostly comprised of BBB bonds while XLC has a high exposure to the communication services sector. Overall, VCIT has provided lower returns than XLC over the past ten years.

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

Introduction To Mutual Funds
Introduction To Mutual Funds
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Summary

VCITXLC
NameVanguard Intermediate-Term Corporate Bond Index Fund ETF SharesCommunication Services Select Sector SPDR Fund
CategoryCorporate BondCommunications
IssuerVanguardSPDR State Street Global Advisors
AUM48.39B14.09B
Avg. Return5.84%29.04%
Div. Yield2.33%0.62%
Expense Ratio0.05%0.12%

The Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares (VCIT) is a Corporate Bond fund that is issued by Vanguard. It currently has 48.39B total assets under management and has yielded an average annual return of 5.84% over the past 10 years. The fund has a dividend yield of 2.33% with an expense ratio of 0.05%.

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%.

VCIT’s dividend yield is 1.71% higher than that of XLC (2.33% vs. 0.62%). Also, VCIT yielded on average 23.19% less per year over the past decade (5.84% vs. 29.04%). The expense ratio of VCIT is 0.07 percentage points lower than XLC’s (0.05% vs. 0.12%).

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Fund Composition

Holdings

VCIT - Holdings

VCIT Bond SectorsWeight
BBB55.28%
A37.85%
AA5.22%
AAA1.57%
Below B0.08%
Others0.0%
B0.0%
BB0.0%
US Government0.0%

VCIT’s Top Bond Sectors are ratings of BBB, A, AA, AAA, and Below B at 55.28%, 37.85%, 5.22%, 1.57%, and 0.08%. The fund is less weighted towards Others (0.0%), B (0.0%), and BB (0.0%) rated bonds.

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

VCITXLC
Mean Return0.440
R-squared63.180
Std. Deviation5.080
Alpha0.890
Beta1.350
Sharpe Ratio0.910
Treynor Ratio3.430

The Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares (VCIT) has a Standard Deviation of 5.08 with a R-squared of 63.18 and a Alpha of 0.89. Its Sharpe Ratio is 0.91 while VCIT’s Treynor Ratio is 3.43. Furthermore, the fund has a Beta of 1.35 and a Mean Return of 0.44.

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

VCIT’s Mean Return is 0.44 points higher than that of XLC and its R-squared is 63.18 points higher. With a Standard Deviation of 5.08, VCIT is slightly more volatile than XLC. The Alpha and Beta of VCIT are 0.89 points higher and 1.35 points higher than XLC’s Alpha and Beta.

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Performance

Annual Returns

VCIT vs. XLC - Annual Returns

YearVCITXLC
20209.55%26.85%
201913.97%31.22%
2018-1.75%0.0%
20175.5%0.0%
20165.3%0.0%
20150.88%0.0%
20147.47%0.0%
2013-1.8%0.0%
201211.36%0.0%
20117.94%0.0%
201010.65%0.0%

VCIT had its best year in 2019 with an annual return of 13.97%. VCIT’s worst year over the past decade yielded -1.8% and occurred in 2013. In most years the Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares provided moderate returns such as in 2017, 2014, and 2011 where annual returns amounted to 5.5%, 7.47%, and 7.94% 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

VCIT vs. XLC - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
VCIT$10,000$12,4855.84%
XLC$10,000$16,64529.04%

A $10,000 investment in VCIT would have resulted in a final balance of $12,485. This is a profit of $2,485 over 2 years and amounts to a compound annual growth rate (CAGR) of 5.84%.

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%.

VCIT’s CAGR is 23.19 percentage points lower than that of XLC and as a result, would have yielded $4,160 less on a $10,000 investment. Thus, VCIT performed worse than XLC by 23.19% annually.


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