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 | 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 | 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 | 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
| 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
| 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.
Current recommendations:
Over the past years, I have discovered several tools and products that have helped me tremendously on my path to financial freedom:
P.S.: The links below are affiliate links, which means I receive a small commission at no extra cost to you when you sign up for one of the services. Thank you for your support!
1)Personal Capital is simply the best tool out there to track your net worth and plan for financial freedom. Just their retirement planner alone has become an invaluable tool to keep myself on track financially. Try it out, it's free!
2) Take a look at M1 Finance, my favorite broker. I love how easy it is to invest and maintain my portfolio with them. I can set up automatic transfers, rebalance my portfolio with one click and even borrow up to 35% of my assets at super low interest rates!
3) Fundrise is by far the best way I've found to invest in Real Estate. You can diversify your portfolio by investing in their eREITs or even allocate capital to individual properties (without the hassle of managing tenants!).
4) Groundfloor is another great way to get exposure to the real estate sector by investing in short-term, high-yield real estate debt. Current returns are >10% and you can get started with just $10.
5) If you are interested in startup investing, check out Mainvest. I've started allocating a small amount of assets to invest in and support small businesses. Return targets are between 10-25% and you can start with just $100!
To see all of my most up-to-date recommendations, check out the Recommended Tools section.
I believe that money is just a means to an end: to be free to spend your time as you wish, to maximize your positive impact on the world.
