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VCIT vs. XLY: What’s The Difference?

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

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

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

Introduction To Mutual Funds
Introduction To Mutual Funds
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Summary

VCITXLY
NameVanguard Intermediate-Term Corporate Bond Index Fund ETF SharesConsumer Discretionary Select Sector SPDR Fund
CategoryCorporate BondConsumer Cyclical
IssuerVanguardSPDR State Street Global Advisors
AUM48.39B20.21B
Avg. Return5.84%18.86%
Div. Yield2.33%0.63%
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 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%.

VCIT’s dividend yield is 1.70% higher than that of XLY (2.33% vs. 0.63%). Also, VCIT yielded on average 13.02% less per year over the past decade (5.84% vs. 18.86%). The expense ratio of VCIT is 0.07 percentage points lower than XLY’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.

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

VCITXLY
Mean Return0.441.47
R-squared63.1880.84
Std. Deviation5.0815.97
Alpha0.896.96
Beta1.351.02
Sharpe Ratio0.911.06
Treynor Ratio3.4316.69

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

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

VCIT’s Mean Return is 1.03 points lower than that of XLY and its R-squared is 17.66 points lower. With a Standard Deviation of 5.08, VCIT is slightly less volatile than XLY. The Alpha and Beta of VCIT are 6.07 points lower and 0.33 points higher than XLY’s Alpha and Beta.

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Performance

Annual Returns

VCIT vs. XLY - Annual Returns

YearVCITXLY
20209.55%29.66%
201913.97%28.43%
2018-1.75%1.66%
20175.5%22.77%
20165.3%5.87%
20150.88%9.93%
20147.47%9.49%
2013-1.8%42.74%
201211.36%23.6%
20117.94%5.98%
201010.65%27.36%

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 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

VCIT vs. XLY - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
VCIT$10,000$17,4395.84%
XLY$10,000$49,51818.86%

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 XLY, the end total would have been $49,518. This equates to a $39,518 profit over 10 years and a compound annual growth rate (CAGR) of 18.86%.

VCIT’s CAGR is 13.02 percentage points lower than that of XLY and as a result, would have yielded $32,079 less on a $10,000 investment. Thus, VCIT performed worse than XLY by 13.02% annually.


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