The Vanguard FTSE Developed Markets Index Fund ETF Shares (VEA) and the Financial Select Sector SPDR Fund (XLF) are both among the Top 100 ETFs. VEA is a Vanguard Foreign Large Blend fund and XLF is a SPDR State Street Global Advisors Financial fund. So, what’s the difference between VEA and XLF? And which fund is better?
The expense ratio of VEA is 0.07 percentage points lower than XLF’s (0.05% vs. 0.12%). VEA also has a lower exposure to the financial services sector and a lower standard deviation. Overall, VEA has provided lower returns than XLF over the past ten years.
In this article, we’ll compare VEA vs. XLF. We’ll look at risk metrics and annual returns, as well as at their portfolio growth and industry exposure. Moreover, I’ll also discuss VEA’s and XLF’s holdings, fund composition, and performance and examine how these affect their overall returns.
Summary
| VEA | XLF | |
| Name | Vanguard FTSE Developed Markets Index Fund ETF Shares | Financial Select Sector SPDR Fund |
| Category | Foreign Large Blend | Financial |
| Issuer | Vanguard | SPDR State Street Global Advisors |
| AUM | 157.48B | 40.81B |
| Avg. Return | 7.05% | 12.17% |
| Div. Yield | 2.49% | 1.57% |
| 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 Financial Select Sector SPDR Fund (XLF) is a Financial fund that is issued by SPDR State Street Global Advisors. It currently has 40.81B total assets under management and has yielded an average annual return of 12.17% over the past 10 years. The fund has a dividend yield of 1.57% with an expense ratio of 0.12%.
VEA’s dividend yield is 0.92% higher than that of XLF (2.49% vs. 1.57%). Also, VEA yielded on average 5.12% less per year over the past decade (7.05% vs. 12.17%). The expense ratio of VEA is 0.07 percentage points lower than XLF’s (0.05% vs. 0.12%).
Fund Composition
Industry Exposure
| VEA | XLF | |
| Technology | 11.67% | 0.0% |
| Industrials | 15.47% | 0.0% |
| Energy | 4.17% | 0.0% |
| Communication Services | 5.41% | 0.0% |
| 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% | 100.0% |
| 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 Financial Select Sector SPDR Fund (XLF) has the most exposure to the Financial Services sector at 100.0%. This is followed by Technology and Industrials at 0.0% and 0.0% respectively. Consumer Cyclical (0.0%), Real Estate (0.0%), and Consumer Defensive (0.0%) only make up 0.00% of the fund’s total assets.
XLF’s mid-section with moderate exposure is comprised of Healthcare, Utilities, Communication Services, Energy, and Industrials stocks at 0.0%, 0.0%, 0.0%, 0.0%, and 0.0%.
VEA is 82.61% less exposed to the Financial Services sector than XLF (17.39% vs 100.0%). 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 13.62% more of the fund’s holdings compared to XLF (13.62% vs. 0.00%).
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%.
| XLF Holdings | Weight |
| Berkshire Hathaway Inc Class B | 12.83% |
| JPMorgan Chase & Co | 11.47% |
| Bank of America Corp | 7.57% |
| Wells Fargo & Co | 4.56% |
| Citigroup Inc | 3.56% |
| Morgan Stanley | 3.32% |
| Goldman Sachs Group Inc | 3.15% |
| BlackRock Inc | 3.02% |
| Charles Schwab Corp | 2.66% |
| American Express Co | 2.62% |
XLF’s Top Holdings are Berkshire Hathaway Inc Class B, JPMorgan Chase & Co, Bank of America Corp, Wells Fargo & Co, and Citigroup Inc at 12.83%, 11.47%, 7.57%, 4.56%, and 3.56%.
Morgan Stanley (3.32%), Goldman Sachs Group Inc (3.15%), and BlackRock Inc (3.02%) have a slightly smaller but still significant weight. Charles Schwab Corp and American Express Co are also represented in the XLF’s holdings at 2.66% and 2.62%.
Performance
Annual Returns
| Year | VEA | XLF |
| 2020 | 10.29% | -1.68% |
| 2019 | 22.08% | 31.88% |
| 2018 | -14.47% | -13.09% |
| 2017 | 26.44% | 22.03% |
| 2016 | 2.51% | 22.55% |
| 2015 | -0.21% | -1.6% |
| 2014 | -5.71% | 15.02% |
| 2013 | 22.12% | 35.37% |
| 2012 | 18.6% | 28.53% |
| 2011 | -12.57% | -17.16% |
| 2010 | 8.47% | 11.97% |
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 2013 was the strongest year for XLF, returning 35.37% on an annual basis. The poorest year for XLF in the last ten years was 2011, with a yield of -17.16%. Most years the Financial Select Sector SPDR Fund has given investors modest returns, such as in 2010, 2014, and 2017, when gains were 11.97%, 15.02%, and 22.03% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| VEA | $10,000 | $19,290 | 7.05% |
| XLF | $10,000 | $30,782 | 12.17% |
A $10,000 investment in VEA would have resulted in a final balance of $19,290. This is a profit of $9,290 over 11 years and amounts to a compound annual growth rate (CAGR) of 7.05%.
With a $10,000 investment in XLF, the end total would have been $30,782. This equates to a $20,782 profit over 11 years and a compound annual growth rate (CAGR) of 12.17%.
VEA’s CAGR is 5.12 percentage points lower than that of XLF and as a result, would have yielded $11,492 less on a $10,000 investment. Thus, VEA performed worse than XLF by 5.12% annually.
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