VEA vs. XLK: What’s The Difference?

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

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

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

Summary

VEA XLK
Name Vanguard FTSE Developed Markets Index Fund ETF Shares Technology Select Sector SPDR Fund
Category Foreign Large Blend Technology
Issuer Vanguard SPDR State Street Global Advisors
AUM 157.48B 42.3B
Avg. Return 7.05% 20.02%
Div. Yield 2.49% 0.73%
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 Technology Select Sector SPDR Fund (XLK) is a Technology fund that is issued by SPDR State Street Global Advisors. It currently has 42.3B total assets under management and has yielded an average annual return of 20.02% over the past 10 years. The fund has a dividend yield of 0.73% with an expense ratio of 0.12%.

VEA’s dividend yield is 1.76% higher than that of XLK (2.49% vs. 0.73%). Also, VEA yielded on average 12.97% less per year over the past decade (7.05% vs. 20.02%). The expense ratio of VEA is 0.07 percentage points lower than XLK’s (0.05% vs. 0.12%).

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Fund Composition

Industry Exposure

VEA vs. XLK - Industry Exposure

VEA XLK
Technology 11.67% 87.54%
Industrials 15.47% 1.75%
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% 10.71%
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 Technology Select Sector SPDR Fund (XLK) has the most exposure to the Technology sector at 87.54%. This is followed by Financial Services and Industrials at 10.71% and 1.75% 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.

XLK’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 1.75%.

VEA is 6.68% more exposed to the Financial Services sector than XLK (17.39% vs 10.71%). VEA’s exposure to Industrials and Technology stocks is 13.72% higher and 75.87% lower respectively (15.47% vs. 1.75% and 11.67% vs. 87.54%). In total, Real Estate, Energy, and Communication Services also make up 13.62% more of the fund’s holdings compared to XLK (13.62% vs. 0.00%).

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%.

XLK - Holdings

XLK Holdings Weight
Apple Inc 21.45%
Microsoft Corp 20.37%
NVIDIA Corp 4.98%
Visa Inc Class A 3.95%
PayPal Holdings Inc 3.42%
Mastercard Inc A 3.19%
Adobe Inc 2.8%
Salesforce.com Inc 2.26%
Intel Corp 2.26%
Cisco Systems Inc 2.23%

XLK’s Top Holdings are Apple Inc, Microsoft Corp, NVIDIA Corp, Visa Inc Class A, and PayPal Holdings Inc at 21.45%, 20.37%, 4.98%, 3.95%, and 3.42%.

Mastercard Inc A (3.19%), Adobe Inc (2.8%), and Salesforce.com Inc (2.26%) have a slightly smaller but still significant weight. Intel Corp and Cisco Systems Inc are also represented in the XLK’s holdings at 2.26% and 2.23%.

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Performance

Annual Returns

VEA vs. XLK - Annual Returns

Year VEA XLK
2020 10.29% 43.67%
2019 22.08% 49.97%
2018 -14.47% -1.56%
2017 26.44% 34.27%
2016 2.51% 14.81%
2015 -0.21% 5.62%
2014 -5.71% 17.75%
2013 22.12% 25.98%
2012 18.6% 15.47%
2011 -12.57% 2.69%
2010 8.47% 11.6%

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 XLK, returning 49.97% on an annual basis. The poorest year for XLK in the last ten years was 2018, with a yield of -1.56%. Most years the Technology Select Sector SPDR Fund has given investors modest returns, such as in 2016, 2012, and 2014, when gains were 14.81%, 15.47%, and 17.75% respectively.

Portfolio Growth

VEA vs. XLK - Portfolio Growth

Fund Initial Balance Final Balance CAGR
VEA $10,000 $19,290 7.05%
XLK $10,000 $67,790 20.02%

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 XLK, the end total would have been $67,790. This equates to a $57,790 profit over 11 years and a compound annual growth rate (CAGR) of 20.02%.

VEA’s CAGR is 12.97 percentage points lower than that of XLK and as a result, would have yielded $48,500 less on a $10,000 investment. Thus, VEA performed worse than XLK by 12.97% annually.


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