The Vanguard FTSE Developed Markets Index Fund ETF Shares (VEA) and the Consumer Discretionary Select Sector SPDR Fund (XLY) are both among the Top 100 ETFs. VEA is a Vanguard Foreign Large Blend fund and XLY is a SPDR State Street Global Advisors Consumer Cyclical fund. So, what’s the difference between VEA and XLY? And which fund is better?
The expense ratio of VEA is 0.07 percentage points lower than XLY’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 XLY over the past ten years.
In this article, we’ll compare VEA vs. XLY. We’ll look at annual returns and holdings, as well as at their portfolio growth and industry exposure. Moreover, I’ll also discuss VEA’s and XLY’s risk metrics, fund composition, and performance and examine how these affect their overall returns.
|Name||Vanguard FTSE Developed Markets Index Fund ETF Shares||Consumer Discretionary Select Sector SPDR Fund|
|Category||Foreign Large Blend||Consumer Cyclical|
|Issuer||Vanguard||SPDR State Street Global Advisors|
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 Consumer Discretionary Select Sector SPDR Fund (XLY) is a Consumer Cyclical fund that is issued by SPDR State Street Global Advisors. It currently has 20.21B total assets under management and has yielded an average annual return of 18.86% over the past 10 years. The fund has a dividend yield of 0.63% with an expense ratio of 0.12%.
VEA’s dividend yield is 1.86% higher than that of XLY (2.49% vs. 0.63%). Also, VEA yielded on average 11.81% less per year over the past decade (7.05% vs. 18.86%). The expense ratio of VEA is 0.07 percentage points lower than XLY’s (0.05% vs. 0.12%).
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 Consumer Discretionary Select Sector SPDR Fund (XLY) has the most exposure to the Consumer Cyclical sector at 94.1%. This is followed by Consumer Defensive and Technology at 5.34% and 0.57% respectively. Financial Services (0.0%), Real Estate (0.0%), and Healthcare (0.0%) only make up 0.00% of the fund’s total assets.
XLY’s mid-section with moderate exposure is comprised of Utilities, Communication Services, Energy, Industrials, and Technology stocks at 0.0%, 0.0%, 0.0%, 0.0%, and 0.57%.
VEA is 17.39% more exposed to the Financial Services sector than XLY (17.39% vs 0.0%). VEA’s exposure to Industrials and Technology stocks is 15.47% higher and 11.10% higher respectively (15.47% vs. 0.0% and 11.67% vs. 0.57%). In total, Real Estate, Energy, and Communication Services also make up 13.62% more of the fund’s holdings compared to XLY (13.62% vs. 0.00%).
|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%|
|Shopify Inc A||0.7%|
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%.
|The Home Depot Inc||8.74%|
|Nike Inc B||4.45%|
|Lowe’s Companies Inc||3.58%|
|Booking Holdings Inc||2.35%|
|TJX Companies Inc||2.12%|
XLY’s Top Holdings are Amazon.com Inc, Tesla Inc, The Home Depot Inc, McDonald’s Corp, and Nike Inc B at 22.9%, 13.5%, 8.74%, 4.5%, and 4.45%.
Lowe’s Companies Inc (3.58%), Starbucks Corp (3.44%), and Target Corp (3.12%) have a slightly smaller but still significant weight. Booking Holdings Inc and TJX Companies Inc are also represented in the XLY’s holdings at 2.35% and 2.12%.
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 XLY, returning 42.74% on an annual basis. The poorest year for XLY in the last ten years was 2018, with a yield of 1.66%. Most years the Consumer Discretionary Select Sector SPDR Fund has given investors modest returns, such as in 2015, 2017, and 2012, when gains were 9.93%, 22.77%, and 23.6% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
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 XLY, the end total would have been $63,066. This equates to a $53,066 profit over 11 years and a compound annual growth rate (CAGR) of 18.86%.
VEA’s CAGR is 11.81 percentage points lower than that of XLY and as a result, would have yielded $43,776 less on a $10,000 investment. Thus, VEA performed worse than XLY by 11.81% annually.
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