VCSH vs. XLE: What’s The Difference?

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

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

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

Summary

VCSH XLE
Name Vanguard Short-Term Corporate Bond Index Fund ETF Shares Energy Select Sector SPDR Fund
Category Short-Term Bond Equity Energy
Issuer Vanguard SPDR State Street Global Advisors
AUM 47.88B 25.55B
Avg. Return 3.12% 1.28%
Div. Yield 1.89% 3.92%
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 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%.

VCSH’s dividend yield is 2.03% lower than that of XLE (1.89% vs. 3.92%). Also, VCSH yielded on average 1.84% more per year over the past decade (3.12% vs. 1.28%). The expense ratio of VCSH is 0.07 percentage points lower than XLE’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.

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

VCSH XLE
Mean Return 0.24 0.32
R-squared 37.53 61.84
Std. Deviation 2.34 27.52
Alpha 0.93 -11.98
Beta 0.48 1.54
Sharpe Ratio 0.97 0.12
Treynor Ratio 4.75 -0.4

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

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

VCSH’s Mean Return is 0.08 points lower than that of XLE and its R-squared is 24.31 points lower. With a Standard Deviation of 2.34, VCSH is slightly less volatile than XLE. The Alpha and Beta of VCSH are 12.91 points higher and 1.06 points lower than XLE’s Alpha and Beta.

Performance

Annual Returns

VCSH vs. XLE - Annual Returns

Year VCSH XLE
2020 5.08% -32.56%
2019 6.85% 11.87%
2018 0.91% -18.1%
2017 2.45% -1.01%
2016 2.63% 27.95%
2015 1.25% -21.47%
2014 1.96% -8.61%
2013 1.37% 26.16%
2012 5.74% 5.17%
2011 2.94% 2.98%
2010 5.51% 21.7%

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 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

VCSH vs. XLE - Portfolio Growth

Fund Initial Balance Final Balance CAGR
VCSH $10,000 $13,569 3.12%
XLE $10,000 $7,674 1.28%

A $10,000 investment in VCSH would have resulted in a final balance of $13,569. This is a profit of $3,569 over 10 years and amounts to a compound annual growth rate (CAGR) of 3.12%.

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%.

VCSH’s CAGR is 1.84 percentage points higher than that of XLE and as a result, would have yielded $5,895 more on a $10,000 investment. Thus, VCSH outperformed XLE by 1.84% annually.


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