The Vanguard FTSE Europe Index Fund ETF Shares (VGK) and the Consumer Discretionary Select Sector SPDR Fund (XLY) are both among the Top 100 ETFs. VGK is a Vanguard Europe Stock fund and XLY is a SPDR State Street Global Advisors Consumer Cyclical fund. So, what’s the difference between VGK and XLY? And which fund is better?
The expense ratio of VGK is 0.04 percentage points lower than XLY’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 XLY over the past 11 years.
In this article, we’ll compare VGK vs. XLY. We’ll look at performance and risk metrics, as well as at their portfolio growth and holdings. Moreover, I’ll also discuss VGK’s and XLY’s annual returns, industry exposure, and fund composition and examine how these affect their overall returns.
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Summary
| VGK | XLY | |
| Name | Vanguard FTSE Europe Index Fund ETF Shares | Consumer Discretionary Select Sector SPDR Fund |
| Category | Europe Stock | Consumer Cyclical |
| Issuer | Vanguard | SPDR State Street Global Advisors |
| AUM | 25.7B | 20.21B |
| Avg. Return | 6.68% | 18.86% |
| Div. Yield | 2.52% | 0.63% |
| 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 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%.
VGK’s dividend yield is 1.89% higher than that of XLY (2.52% vs. 0.63%). Also, VGK yielded on average 12.18% less per year over the past decade (6.68% vs. 18.86%). The expense ratio of VGK is 0.04 percentage points lower than XLY’s (0.08% vs. 0.12%).
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Fund Composition
Industry Exposure
| VGK | XLY | |
| Technology | 8.3% | 0.57% |
| Industrials | 15.58% | 0.0% |
| Energy | 4.3% | 0.0% |
| Communication Services | 5.09% | 0.0% |
| Utilities | 3.89% | 0.0% |
| Healthcare | 13.76% | 0.0% |
| Consumer Defensive | 11.39% | 5.34% |
| Real Estate | 2.57% | 0.0% |
| Financial Services | 15.85% | 0.0% |
| Consumer Cyclical | 11.6% | 94.1% |
| 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 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%.
VGK is 15.85% more exposed to the Financial Services sector than XLY (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 13.28% more of the fund’s holdings compared to XLY (13.28% vs. 0.00%).
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%.
| XLY Holdings | Weight |
| Amazon.com Inc | 22.9% |
| Tesla Inc | 13.5% |
| The Home Depot Inc | 8.74% |
| McDonald’s Corp | 4.5% |
| Nike Inc B | 4.45% |
| Lowe’s Companies Inc | 3.58% |
| Starbucks Corp | 3.44% |
| Target Corp | 3.12% |
| 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%.
Risk Analysis
| VGK | XLY | |
| Mean Return | 0.61 | 1.47 |
| R-squared | 92.76 | 80.84 |
| Std. Deviation | 16.65 | 15.97 |
| Alpha | 0.45 | 6.96 |
| Beta | 1.06 | 1.02 |
| Sharpe Ratio | 0.4 | 1.06 |
| Treynor Ratio | 5.12 | 16.69 |
The Vanguard FTSE Europe Index Fund ETF Shares (VGK) has a R-squared of 92.76 with a Treynor Ratio of 5.12 and a Alpha of 0.45. Its Sharpe Ratio is 0.4 while VGK’s Standard Deviation is 16.65. Furthermore, the fund has a Mean Return of 0.61 and a Beta of 1.06.
The Consumer Discretionary Select Sector SPDR Fund (XLY) has a Beta of 1.02 with a R-squared of 80.84 and a Standard Deviation of 15.97. Its Sharpe Ratio is 1.06 while XLY’s Mean Return is 1.47. Furthermore, the fund has a Alpha of 6.96 and a Treynor Ratio of 16.69.
VGK’s Mean Return is 0.86 points lower than that of XLY and its R-squared is 11.92 points higher. With a Standard Deviation of 16.65, VGK is slightly more volatile than XLY. The Alpha and Beta of VGK are 6.51 points lower and 0.04 points higher than XLY’s Alpha and Beta.
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Performance
Annual Returns
| Year | VGK | XLY |
| 2020 | 6.5% | 29.66% |
| 2019 | 24.26% | 28.43% |
| 2018 | -14.79% | 1.66% |
| 2017 | 27.06% | 22.77% |
| 2016 | -0.59% | 5.87% |
| 2015 | -1.87% | 9.93% |
| 2014 | -6.56% | 9.49% |
| 2013 | 24.93% | 42.74% |
| 2012 | 21.01% | 23.6% |
| 2011 | -11.49% | 5.98% |
| 2010 | 5.01% | 27.36% |
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 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.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| VGK | $10,000 | $18,350 | 6.68% |
| XLY | $10,000 | $63,066 | 18.86% |
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 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%.
VGK’s CAGR is 12.18 percentage points lower than that of XLY and as a result, would have yielded $44,716 less on a $10,000 investment. Thus, VGK performed worse than XLY by 12.18% annually.
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