The Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares (VCIT) and the Health Care Select Sector SPDR Fund (XLV) are both among the Top 100 ETFs. VCIT is a Vanguard Corporate Bond fund and XLV is a SPDR State Street Global Advisors Health fund. So, what’s the difference between VCIT and XLV? And which fund is better?
The expense ratio of VCIT is 0.07 percentage points lower than XLV’s (0.05% vs. 0.12%). VCIT is mostly comprised of BBB bonds while XLV has a high exposure to the healthcare sector. Overall, VCIT has provided lower returns than XLV over the past ten years.
In this article, we’ll compare VCIT vs. XLV. We’ll look at fund composition and risk metrics, as well as at their industry exposure and annual returns. Moreover, I’ll also discuss VCIT’s and XLV’s portfolio growth, holdings, and performance and examine how these affect their overall returns.
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|Name||Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares||Health Care Select Sector SPDR Fund|
|Issuer||Vanguard||SPDR State Street Global Advisors|
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 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%.
VCIT’s dividend yield is 0.93% higher than that of XLV (2.33% vs. 1.4%). Also, VCIT yielded on average 9.18% less per year over the past decade (5.84% vs. 15.02%). The expense ratio of VCIT is 0.07 percentage points lower than XLV’s (0.05% vs. 0.12%).
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|VCIT Bond Sectors||Weight|
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.
|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%.
The Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares (VCIT) has a Treynor Ratio of 3.43 with a Beta of 1.35 and a Mean Return of 0.44. Its Standard Deviation is 5.08 while VCIT’s Sharpe Ratio is 0.91. Furthermore, the fund has a Alpha of 0.89 and a R-squared of 63.18.
The Health Care Select Sector SPDR Fund (XLV) has a Mean Return of 1.27 with a Alpha of 7.75 and a Treynor Ratio of 21.1. Its Beta is 0.7 while XLV’s Sharpe Ratio is 1.13. Furthermore, the fund has a Standard Deviation of 12.94 and a R-squared of 58.19.
VCIT’s Mean Return is 0.83 points lower than that of XLV and its R-squared is 4.99 points higher. With a Standard Deviation of 5.08, VCIT is slightly less volatile than XLV. The Alpha and Beta of VCIT are 6.86 points lower and 0.65 points higher than XLV’s Alpha and Beta.
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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 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 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 XLV, the end total would have been $42,899. This equates to a $32,899 profit over 10 years and a compound annual growth rate (CAGR) of 15.02%.
VCIT’s CAGR is 9.18 percentage points lower than that of XLV and as a result, would have yielded $25,460 less on a $10,000 investment. Thus, VCIT performed worse than XLV by 9.18% annually.
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