VGK vs. XLC: What’s The Difference?

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

The expense ratio of VGK is 0.04 percentage points lower than XLC’s (0.08% vs. 0.12%). VGK also has a higher exposure to the financial services sector and a higher standard deviation. Overall, VGK has provided lower returns than XLC over the past 2 years.

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

Summary

VGK XLC
Name Vanguard FTSE Europe Index Fund ETF Shares Communication Services Select Sector SPDR Fund
Category Europe Stock Communications
Issuer Vanguard SPDR State Street Global Advisors
AUM 25.7B 14.09B
Avg. Return 6.68% 29.04%
Div. Yield 2.52% 0.62%
Expense Ratio 0.08% 0.12%

The Vanguard FTSE Europe Index Fund ETF Shares (VGK) is a Europe Stock fund that is issued by Vanguard. It currently has 25.7B total assets under management and has yielded an average annual return of 6.68% over the past 10 years. The fund has a dividend yield of 2.52% with an expense ratio of 0.08%.

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%.

VGK’s dividend yield is 1.90% higher than that of XLC (2.52% vs. 0.62%). Also, VGK yielded on average 22.36% less per year over the past decade (6.68% vs. 29.04%). The expense ratio of VGK is 0.04 percentage points lower than XLC’s (0.08% vs. 0.12%).

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Fund Composition

Industry Exposure

VGK vs. XLC - Industry Exposure

VGK XLC
Technology 8.3% 0.0%
Industrials 15.58% 0.0%
Energy 4.3% 0.0%
Communication Services 5.09% 100.0%
Utilities 3.89% 0.0%
Healthcare 13.76% 0.0%
Consumer Defensive 11.39% 0.0%
Real Estate 2.57% 0.0%
Financial Services 15.85% 0.0%
Consumer Cyclical 11.6% 0.0%
Basic Materials 7.67% 0.0%

The Vanguard FTSE Europe Index Fund ETF Shares (VGK) has the most exposure to the Financial Services sector at 15.85%. This is followed by Industrials and Healthcare at 15.58% and 13.76% respectively. Utilities (3.89%), Energy (4.3%), and Communication Services (5.09%) only make up 13.28% of the fund’s total assets.

VGK’s mid-section with moderate exposure is comprised of Basic Materials, Technology, Consumer Defensive, Consumer Cyclical, and Healthcare stocks at 7.67%, 8.3%, 11.39%, 11.6%, and 13.76%.

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%.

VGK is 15.85% more exposed to the Financial Services sector than XLC (15.85% vs 0.0%). VGK’s exposure to Industrials and Healthcare stocks is 15.58% higher and 13.76% higher respectively (15.58% vs. 0.0% and 13.76% vs. 0.0%). In total, Utilities, Energy, and Communication Services also make up 86.72% less of the fund’s holdings compared to XLC (13.28% vs. 100.00%).

Holdings

VGK - Holdings

VGK Holdings Weight
Nestle SA 2.82%
ASML Holding NV 2.2%
Roche Holding AG 2.13%
LVMH Moet Hennessy Louis Vuitton SE 1.58%
Novartis AG 1.55%
AstraZeneca PLC 1.27%
SAP SE 1.25%
Unilever PLC 1.23%
Novo Nordisk A/S B 1.09%
Siemens AG 0.96%

VGK’s Top Holdings are Nestle SA, ASML Holding NV, Roche Holding AG, LVMH Moet Hennessy Louis Vuitton SE, and Novartis AG at 2.82%, 2.2%, 2.13%, 1.58%, and 1.55%.

AstraZeneca PLC (1.27%), SAP SE (1.25%), and Unilever PLC (1.23%) have a slightly smaller but still significant weight. Novo Nordisk A/S B and Siemens AG are also represented in the VGK’s holdings at 1.09% and 0.96%.

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%.

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Risk Analysis

VGK XLC
Mean Return 0.61 0
R-squared 92.76 0
Std. Deviation 16.65 0
Alpha 0.45 0
Beta 1.06 0
Sharpe Ratio 0.4 0
Treynor Ratio 5.12 0

The Vanguard FTSE Europe Index Fund ETF Shares (VGK) has a Sharpe Ratio of 0.4 with a R-squared of 92.76 and a Alpha of 0.45. Its Mean Return is 0.61 while VGK’s Beta is 1.06. Furthermore, the fund has a Standard Deviation of 16.65 and a Treynor Ratio of 5.12.

The Communication Services Select Sector SPDR Fund (XLC) has a Standard Deviation of 0 with a Sharpe Ratio of 0 and a Mean Return of 0. Its Treynor Ratio is 0 while XLC’s R-squared is 0. Furthermore, the fund has a Beta of 0 and a Alpha of 0.

VGK’s Mean Return is 0.61 points higher than that of XLC and its R-squared is 92.76 points higher. With a Standard Deviation of 16.65, VGK is slightly more volatile than XLC. The Alpha and Beta of VGK are 0.45 points higher and 1.06 points higher than XLC’s Alpha and Beta.

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Performance

Annual Returns

VGK vs. XLC - Annual Returns

Year VGK XLC
2020 6.5% 26.85%
2019 24.26% 31.22%
2018 -14.79% 0.0%
2017 27.06% 0.0%
2016 -0.59% 0.0%
2015 -1.87% 0.0%
2014 -6.56% 0.0%
2013 24.93% 0.0%
2012 21.01% 0.0%
2011 -11.49% 0.0%
2010 5.01% 0.0%

VGK had its best year in 2017 with an annual return of 27.06%. VGK’s worst year over the past decade yielded -14.79% and occurred in 2018. In most years the Vanguard FTSE Europe Index Fund ETF Shares provided moderate returns such as in 2016, 2010, and 2020 where annual returns amounted to -0.59%, 5.01%, and 6.5% 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

VGK vs. XLC - Portfolio Growth

Fund Initial Balance Final Balance CAGR
VGK $10,000 $13,233 6.68%
XLC $10,000 $16,645 29.04%

A $10,000 investment in VGK would have resulted in a final balance of $13,233. This is a profit of $3,233 over 2 years and amounts to a compound annual growth rate (CAGR) of 6.68%.

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%.

VGK’s CAGR is 22.36 percentage points lower than that of XLC and as a result, would have yielded $3,412 less on a $10,000 investment. Thus, VGK performed worse than XLC by 22.36% annually.


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