VCIT vs. XLE: What’s The Difference?

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

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

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

Summary

VCIT XLE
Name Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares Energy Select Sector SPDR Fund
Category Corporate Bond Equity Energy
Issuer Vanguard SPDR State Street Global Advisors
AUM 48.39B 25.55B
Avg. Return 5.84% 1.28%
Div. Yield 2.33% 3.92%
Expense Ratio 0.05% 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 Energy Select Sector SPDR Fund (XLE) is a Equity Energy fund that is issued by SPDR State Street Global Advisors. It currently has 25.55B total assets under management and has yielded an average annual return of 1.28% over the past 10 years. The fund has a dividend yield of 3.92% with an expense ratio of 0.12%.

VCIT’s dividend yield is 1.59% lower than that of XLE (2.33% vs. 3.92%). Also, VCIT yielded on average 4.56% more per year over the past decade (5.84% vs. 1.28%). The expense ratio of VCIT is 0.07 percentage points lower than XLE’s (0.05% vs. 0.12%).

Fund Composition

Holdings

VCIT - Holdings

VCIT Bond Sectors Weight
BBB 55.28%
A 37.85%
AA 5.22%
AAA 1.57%
Below B 0.08%
Others 0.0%
B 0.0%
BB 0.0%
US Government 0.0%

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.

XLE - Holdings

XLE Holdings Weight
Exxon Mobil Corp 23.7%
Chevron Corp 20.03%
ConocoPhillips 4.64%
EOG Resources Inc 4.46%
Schlumberger Ltd 4.43%
Marathon Petroleum Corp 4.17%
Pioneer Natural Resources Co 4.08%
Phillips 66 4.07%
Kinder Morgan Inc Class P 3.85%
Williams Companies Inc 3.5%

XLE’s Top Holdings are Exxon Mobil Corp, Chevron Corp, ConocoPhillips, EOG Resources Inc, and Schlumberger Ltd at 23.7%, 20.03%, 4.64%, 4.46%, and 4.43%.

Marathon Petroleum Corp (4.17%), Pioneer Natural Resources Co (4.08%), and Phillips 66 (4.07%) have a slightly smaller but still significant weight. Kinder Morgan Inc Class P and Williams Companies Inc are also represented in the XLE’s holdings at 3.85% and 3.5%.

Risk Analysis

VCIT XLE
Mean Return 0.44 0.32
R-squared 63.18 61.84
Std. Deviation 5.08 27.52
Alpha 0.89 -11.98
Beta 1.35 1.54
Sharpe Ratio 0.91 0.12
Treynor Ratio 3.43 -0.4

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

The Energy Select Sector SPDR Fund (XLE) has a Alpha of -11.98 with a Standard Deviation of 27.52 and a Beta of 1.54. Its Mean Return is 0.32 while XLE’s Sharpe Ratio is 0.12. Furthermore, the fund has a Treynor Ratio of -0.4 and a R-squared of 61.84.

VCIT’s Mean Return is 0.12 points higher than that of XLE and its R-squared is 1.34 points higher. With a Standard Deviation of 5.08, VCIT is slightly less volatile than XLE. The Alpha and Beta of VCIT are 12.87 points higher and 0.19 points lower than XLE’s Alpha and Beta.

Performance

Annual Returns

VCIT vs. XLE - Annual Returns

Year VCIT XLE
2020 9.55% -32.56%
2019 13.97% 11.87%
2018 -1.75% -18.1%
2017 5.5% -1.01%
2016 5.3% 27.95%
2015 0.88% -21.47%
2014 7.47% -8.61%
2013 -1.8% 26.16%
2012 11.36% 5.17%
2011 7.94% 2.98%
2010 10.65% 21.7%

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 2016 was the strongest year for XLE, returning 27.95% on an annual basis. The poorest year for XLE in the last ten years was 2020, with a yield of -32.56%. Most years the Energy Select Sector SPDR Fund has given investors modest returns, such as in 2017, 2011, and 2012, when gains were -1.01%, 2.98%, and 5.17% respectively.

Portfolio Growth

VCIT vs. XLE - Portfolio Growth

Fund Initial Balance Final Balance CAGR
VCIT $10,000 $17,439 5.84%
XLE $10,000 $7,674 1.28%

A $10,000 investment in VCIT would have resulted in a final balance of $17,439. This is a profit of $7,439 over 10 years and amounts to a compound annual growth rate (CAGR) of 5.84%.

With a $10,000 investment in XLE, the end total would have been $7,674. This equates to a $-2,326 profit over 10 years and a compound annual growth rate (CAGR) of 1.28%.

VCIT’s CAGR is 4.56 percentage points higher than that of XLE and as a result, would have yielded $9,765 more on a $10,000 investment. Thus, VCIT outperformed XLE by 4.56% annually.


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