VEA vs. XLC: What’s The Difference?

The Vanguard FTSE Developed Markets Index Fund ETF Shares (VEA) and the Communication Services Select Sector SPDR Fund (XLC) are both among the Top 100 ETFs. VEA is a Vanguard Foreign Large Blend fund and XLC is a SPDR State Street Global Advisors Communications fund. So, what’s the difference between VEA and XLC? And which fund is better?

The expense ratio of VEA is 0.07 percentage points lower than XLC’s (0.05% vs. 0.12%). VEA also has a higher exposure to the financial services sector and a higher standard deviation. Overall, VEA has provided lower returns than XLC over the past ten years.

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

Summary

VEA XLC
Name Vanguard FTSE Developed Markets Index Fund ETF Shares Communication Services Select Sector SPDR Fund
Category Foreign Large Blend Communications
Issuer Vanguard SPDR State Street Global Advisors
AUM 157.48B 14.09B
Avg. Return 7.05% 29.04%
Div. Yield 2.49% 0.62%
Expense Ratio 0.05% 0.12%

The Vanguard FTSE Developed Markets Index Fund ETF Shares (VEA) is a Foreign Large Blend fund that is issued by Vanguard. It currently has 157.48B total assets under management and has yielded an average annual return of 7.05% over the past 10 years. The fund has a dividend yield of 2.49% 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%.

VEA’s dividend yield is 1.87% higher than that of XLC (2.49% vs. 0.62%). Also, VEA yielded on average 21.98% less per year over the past decade (7.05% vs. 29.04%). The expense ratio of VEA is 0.07 percentage points lower than XLC’s (0.05% vs. 0.12%).

Fund Composition

Industry Exposure

VEA vs. XLC - Industry Exposure

VEA XLC
Technology 11.67% 0.0%
Industrials 15.47% 0.0%
Energy 4.17% 0.0%
Communication Services 5.41% 100.0%
Utilities 3.1% 0.0%
Healthcare 10.6% 0.0%
Consumer Defensive 8.61% 0.0%
Real Estate 4.04% 0.0%
Financial Services 17.39% 0.0%
Consumer Cyclical 11.31% 0.0%
Basic Materials 8.24% 0.0%

The Vanguard FTSE Developed Markets Index Fund ETF Shares (VEA) has the most exposure to the Financial Services sector at 17.39%. This is followed by Industrials and Technology at 15.47% and 11.67% respectively. Real Estate (4.04%), Energy (4.17%), and Communication Services (5.41%) only make up 13.62% of the fund’s total assets.

VEA’s mid-section with moderate exposure is comprised of Basic Materials, Consumer Defensive, Healthcare, Consumer Cyclical, and Technology stocks at 8.24%, 8.61%, 10.6%, 11.31%, and 11.67%.

The Communication Services Select Sector SPDR Fund (XLC) has the most exposure to the Communication Services sector at 100.0%. This is followed by Technology and Industrials at 0.0% and 0.0% respectively. Consumer Cyclical (0.0%), Financial Services (0.0%), and Real Estate (0.0%) only make up 0.00% of the fund’s total assets.

XLC’s mid-section with moderate exposure is comprised of Consumer Defensive, Healthcare, Utilities, Energy, and Industrials stocks at 0.0%, 0.0%, 0.0%, 0.0%, and 0.0%.

VEA is 17.39% more exposed to the Financial Services sector than XLC (17.39% vs 0.0%). VEA’s exposure to Industrials and Technology stocks is 15.47% higher and 11.67% higher respectively (15.47% vs. 0.0% and 11.67% vs. 0.0%). In total, Real Estate, Energy, and Communication Services also make up 86.38% less of the fund’s holdings compared to XLC (13.62% vs. 100.00%).

Holdings

VEA - Holdings

VEA Holdings Weight
Nestle SA 1.5%
Samsung Electronics Co Ltd 1.4%
ASML Holding NV 1.16%
Roche Holding AG 1.1%
Toyota Motor Corp 0.92%
LVMH Moet Hennessy Louis Vuitton SE 0.84%
Novartis AG 0.82%
Shopify Inc A 0.7%
AstraZeneca PLC 0.67%
SAP SE 0.66%

VEA’s Top Holdings are Nestle SA, Samsung Electronics Co Ltd, ASML Holding NV, Roche Holding AG, and Toyota Motor Corp at 1.5%, 1.4%, 1.16%, 1.1%, and 0.92%.

LVMH Moet Hennessy Louis Vuitton SE (0.84%), Novartis AG (0.82%), and Shopify Inc A (0.7%) have a slightly smaller but still significant weight. AstraZeneca PLC and SAP SE are also represented in the VEA’s holdings at 0.67% and 0.66%.

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%.

Performance

Annual Returns

VEA vs. XLC - Annual Returns

Year VEA XLC
2020 10.29% 26.85%
2019 22.08% 31.22%
2018 -14.47% 0.0%
2017 26.44% 0.0%
2016 2.51% 0.0%
2015 -0.21% 0.0%
2014 -5.71% 0.0%
2013 22.12% 0.0%
2012 18.6% 0.0%
2011 -12.57% 0.0%
2010 8.47% 0.0%

VEA had its best year in 2017 with an annual return of 26.44%. VEA’s worst year over the past decade yielded -14.47% and occurred in 2018. In most years the Vanguard FTSE Developed Markets Index Fund ETF Shares provided moderate returns such as in 2016, 2010, and 2020 where annual returns amounted to 2.51%, 8.47%, and 10.29% 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

VEA vs. XLC - Portfolio Growth

Fund Initial Balance Final Balance CAGR
VEA $10,000 $13,464 7.05%
XLC $10,000 $16,645 29.04%

A $10,000 investment in VEA would have resulted in a final balance of $13,464. This is a profit of $3,464 over 2 years and amounts to a compound annual growth rate (CAGR) of 7.05%.

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%.

VEA’s CAGR is 21.98 percentage points lower than that of XLC and as a result, would have yielded $3,181 less on a $10,000 investment. Thus, VEA performed worse than XLC by 21.98% annually.


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