VCSH vs. XLC: What’s The Difference?

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

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

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

Summary

VCSH XLC
Name Vanguard Short-Term Corporate Bond Index Fund ETF Shares Communication Services Select Sector SPDR Fund
Category Short-Term Bond Communications
Issuer Vanguard SPDR State Street Global Advisors
AUM 47.88B 14.09B
Avg. Return 3.12% 29.04%
Div. Yield 1.89% 0.62%
Expense Ratio 0.05% 0.12%

The Vanguard Short-Term Corporate Bond Index Fund ETF Shares (VCSH) is a Short-Term Bond fund that is issued by Vanguard. It currently has 47.88B total assets under management and has yielded an average annual return of 3.12% over the past 10 years. The fund has a dividend yield of 1.89% 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%.

VCSH’s dividend yield is 1.27% higher than that of XLC (1.89% vs. 0.62%). Also, VCSH yielded on average 25.92% less per year over the past decade (3.12% vs. 29.04%). The expense ratio of VCSH is 0.07 percentage points lower than XLC’s (0.05% vs. 0.12%).

Fund Composition

Holdings

VCSH - Holdings

VCSH Bond Sectors Weight
BBB 47.49%
A 43.06%
AA 8.45%
AAA 0.95%
Below B 0.03%
Others 0.02%
B 0.0%
BB 0.0%
US Government 0.0%

VCSH’s Top Bond Sectors are ratings of BBB, A, AA, AAA, and Below B at 47.49%, 43.06%, 8.45%, 0.95%, and 0.03%. The fund is less weighted towards Others (0.02%), B (0.0%), and BB (0.0%) rated bonds.

XLC - Holdings

XLC Holdings Weight
Facebook Inc A 23.75%
Alphabet Inc A 11.49%
Alphabet Inc Class C 11.16%
Netflix Inc 4.78%
Charter Communications Inc A 4.65%
Comcast Corp Class A 4.44%
T-Mobile US Inc 4.41%
The Walt Disney Co 4.39%
AT&T Inc 4.35%
Verizon Communications Inc 4.33%

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%.

Risk Analysis

VCSH XLC
Mean Return 0.24 0
R-squared 37.53 0
Std. Deviation 2.34 0
Alpha 0.93 0
Beta 0.48 0
Sharpe Ratio 0.97 0
Treynor Ratio 4.75 0

The Vanguard Short-Term Corporate Bond Index Fund ETF Shares (VCSH) has a Sharpe Ratio of 0.97 with a Alpha of 0.93 and a Mean Return of 0.24. Its Treynor Ratio is 4.75 while VCSH’s Standard Deviation is 2.34. Furthermore, the fund has a Beta of 0.48 and a R-squared of 37.53.

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

VCSH’s Mean Return is 0.24 points higher than that of XLC and its R-squared is 37.53 points higher. With a Standard Deviation of 2.34, VCSH is slightly more volatile than XLC. The Alpha and Beta of VCSH are 0.93 points higher and 0.48 points higher than XLC’s Alpha and Beta.

Performance

Annual Returns

VCSH vs. XLC - Annual Returns

Year VCSH XLC
2020 5.08% 26.85%
2019 6.85% 31.22%
2018 0.91% 0.0%
2017 2.45% 0.0%
2016 2.63% 0.0%
2015 1.25% 0.0%
2014 1.96% 0.0%
2013 1.37% 0.0%
2012 5.74% 0.0%
2011 2.94% 0.0%
2010 5.51% 0.0%

VCSH had its best year in 2019 with an annual return of 6.85%. VCSH’s worst year over the past decade yielded 0.91% and occurred in 2018. In most years the Vanguard Short-Term Corporate Bond Index Fund ETF Shares provided moderate returns such as in 2017, 2016, and 2011 where annual returns amounted to 2.45%, 2.63%, and 2.94% 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

VCSH vs. XLC - Portfolio Growth

Fund Initial Balance Final Balance CAGR
VCSH $10,000 $11,227 3.12%
XLC $10,000 $16,645 29.04%

A $10,000 investment in VCSH would have resulted in a final balance of $11,227. This is a profit of $1,227 over 2 years and amounts to a compound annual growth rate (CAGR) of 3.12%.

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%.

VCSH’s CAGR is 25.92 percentage points lower than that of XLC and as a result, would have yielded $5,418 less on a $10,000 investment. Thus, VCSH performed worse than XLC by 25.92% annually.


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