The Vanguard FTSE Europe Index Fund ETF Shares (VGK) and the Industrial Select Sector SPDR Fund (XLI) are both among the Top 100 ETFs. VGK is a Vanguard Europe Stock fund and XLI is a SPDR State Street Global Advisors Industrials fund. So, what’s the difference between VGK and XLI? And which fund is better?
The expense ratio of VGK is 0.04 percentage points lower than XLI’s (0.08% vs. 0.12%). VGK also has a higher exposure to the financial services sector and a lower standard deviation. Overall, VGK has provided lower returns than XLI over the past 11 years.
In this article, we’ll compare VGK vs. XLI. We’ll look at annual returns and industry exposure, as well as at their risk metrics and holdings. Moreover, I’ll also discuss VGK’s and XLI’s performance, fund composition, and portfolio growth and examine how these affect their overall returns.
|Name||Vanguard FTSE Europe Index Fund ETF Shares||Industrial Select Sector SPDR Fund|
|Issuer||Vanguard||SPDR State Street Global Advisors|
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 Industrial Select Sector SPDR Fund (XLI) is a Industrials fund that is issued by SPDR State Street Global Advisors. It currently has 19.33B total assets under management and has yielded an average annual return of 14.44% over the past 10 years. The fund has a dividend yield of 1.25% with an expense ratio of 0.12%.
VGK’s dividend yield is 1.27% higher than that of XLI (2.52% vs. 1.25%). Also, VGK yielded on average 7.76% less per year over the past decade (6.68% vs. 14.44%). The expense ratio of VGK is 0.04 percentage points lower than XLI’s (0.08% vs. 0.12%).
FYI: The best way I've found to invest in ETFs is through M1 Finance. It's free and you even get an instant line of credit! Have a look here (link to M1 Finance).
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 Industrial Select Sector SPDR Fund (XLI) has the most exposure to the Industrials sector at 97.49%. This is followed by Technology and Consumer Cyclical at 1.82% and 0.69% respectively. Financial Services (0.0%), Real Estate (0.0%), and Consumer Defensive (0.0%) only make up 0.00% of the fund’s total assets.
XLI’s mid-section with moderate exposure is comprised of Healthcare, Utilities, Communication Services, Energy, and Consumer Cyclical stocks at 0.0%, 0.0%, 0.0%, 0.0%, and 0.69%.
VGK is 15.85% more exposed to the Financial Services sector than XLI (15.85% vs 0.0%). VGK’s exposure to Industrials and Healthcare stocks is 81.91% lower and 13.76% higher respectively (15.58% vs. 97.49% and 13.76% vs. 0.0%). In total, Utilities, Energy, and Communication Services also make up 13.28% more of the fund’s holdings compared to XLI (13.28% vs. 0.00%).
|ASML Holding NV||2.2%|
|Roche Holding AG||2.13%|
|LVMH Moet Hennessy Louis Vuitton SE||1.58%|
|Novo Nordisk A/S B||1.09%|
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%.
|Honeywell International Inc||4.9%|
|United Parcel Service Inc Class B||4.84%|
|Union Pacific Corp||4.7%|
|Raytheon Technologies Corp||4.16%|
|General Electric Co||3.8%|
|Deere & Co||3.54%|
|Lockheed Martin Corp||2.98%|
XLI’s Top Holdings are Honeywell International Inc, United Parcel Service Inc Class B, Union Pacific Corp, Boeing Co, and Raytheon Technologies Corp at 4.9%, 4.84%, 4.7%, 4.24%, and 4.16%.
Caterpillar Inc (3.84%), General Electric Co (3.8%), and 3M Co (3.7%) have a slightly smaller but still significant weight. Deere & Co and Lockheed Martin Corp are also represented in the XLI’s holdings at 3.54% and 2.98%.
NOTE: The easiest way to add diversification to your portfolio is to invest in real estate through Fundrise. You can become private real estate investor without the burden of property management! Check it out here (link to Fundrise).
The Vanguard FTSE Europe Index Fund ETF Shares (VGK) has a Alpha of 0.45 with a R-squared of 92.76 and a Sharpe Ratio of 0.4. Its Mean Return is 0.61 while VGK’s Treynor Ratio is 5.12. Furthermore, the fund has a Standard Deviation of 16.65 and a Beta of 1.06.
The Industrial Select Sector SPDR Fund (XLI) has a R-squared of 78.97 with a Treynor Ratio of 11.34 and a Standard Deviation of 17.13. Its Sharpe Ratio is 0.76 while XLI’s Mean Return is 1.14. Furthermore, the fund has a Beta of 1.08 and a Alpha of 2.38.
VGK’s Mean Return is 0.53 points lower than that of XLI and its R-squared is 13.79 points higher. With a Standard Deviation of 16.65, VGK is slightly less volatile than XLI. The Alpha and Beta of VGK are 1.93 points lower and 0.02 points lower than XLI’s Alpha and Beta.
BTW: Uncorrelated crypto assets such as Bitcoin can serve as a hedge and mitigate risk. I've allocated around 5% of my portfolio to crypto assets through Coinbase - the simplest and cheapest broker I've found! Click here to read more (link to Coinbase).
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 2013 was the strongest year for XLI, returning 40.44% on an annual basis. The poorest year for XLI in the last ten years was 2018, with a yield of -13.1%. Most years the Industrial Select Sector SPDR Fund has given investors modest returns, such as in 2020, 2012, and 2016, when gains were 11.0%, 14.86%, and 19.93% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in VGK would have resulted in a final balance of $18,350. This is a profit of $8,350 over 11 years and amounts to a compound annual growth rate (CAGR) of 6.68%.
With a $10,000 investment in XLI, the end total would have been $39,853. This equates to a $29,853 profit over 11 years and a compound annual growth rate (CAGR) of 14.44%.
VGK’s CAGR is 7.76 percentage points lower than that of XLI and as a result, would have yielded $21,503 less on a $10,000 investment. Thus, VGK performed worse than XLI by 7.76% annually.
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) 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!
2) 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!).
3) If you are interested in crypto, check out Coinbase. I've started allocating a small amount of assets to the growing crypto space and Coinbase has just been a breeze to use. Once you register, make sure to also open an Coinbase Pro account to buy crypto at the lowest fees on the market (just 0.1%!).
To see all of my most up-to-date recommendations, check out the Recommended Tools section.