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VGT vs. XLC: What’s The Difference?

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

The expense ratio of VGT is 0.02 percentage points lower than XLC’s (0.1% vs. 0.12%). VGT also has a higher exposure to the technology sector and a higher standard deviation. Overall, VGT has provided lower returns than XLC over the past ten years.

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

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Summary

VGTXLC
NameVanguard Information Technology Index Fund ETF SharesCommunication Services Select Sector SPDR Fund
CategoryTechnologyCommunications
IssuerVanguardSPDR State Street Global Advisors
AUM54.13B14.09B
Avg. Return20.84%29.04%
Div. Yield0.66%0.62%
Expense Ratio0.1%0.12%

The Vanguard Information Technology Index Fund ETF Shares (VGT) is a Technology fund that is issued by Vanguard. It currently has 54.13B total assets under management and has yielded an average annual return of 20.84% over the past 10 years. The fund has a dividend yield of 0.66% with an expense ratio of 0.1%.

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%.

VGT’s dividend yield is 0.04% higher than that of XLC (0.66% vs. 0.62%). Also, VGT yielded on average 8.20% less per year over the past decade (20.84% vs. 29.04%). The expense ratio of VGT is 0.02 percentage points lower than XLC’s (0.1% vs. 0.12%).

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Fund Composition

Industry Exposure

VGT vs. XLC - Industry Exposure

VGTXLC
Technology88.89%0.0%
Industrials1.67%0.0%
Energy0.0%0.0%
Communication Services0.61%100.0%
Utilities0.0%0.0%
Healthcare0.0%0.0%
Consumer Defensive0.0%0.0%
Real Estate0.0%0.0%
Financial Services8.83%0.0%
Consumer Cyclical0.0%0.0%
Basic Materials0.0%0.0%

The Vanguard Information Technology Index Fund ETF Shares (VGT) has the most exposure to the Technology sector at 88.89%. This is followed by Financial Services and Industrials at 8.83% and 1.67% 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.

VGT’s mid-section with moderate exposure is comprised of Healthcare, Utilities, Energy, Communication Services, and Industrials stocks at 0.0%, 0.0%, 0.0%, 0.61%, and 1.67%.

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%.

VGT is 88.89% more exposed to the Technology sector than XLC (88.89% vs 0.0%). VGT’s exposure to Financial Services and Industrials stocks is 8.83% higher and 1.67% higher respectively (8.83% vs. 0.0% and 1.67% vs. 0.0%). In total, Consumer Cyclical, Real Estate, and Consumer Defensive also make up 0.00% less of the fund’s holdings compared to XLC (0.00% vs. 0.00%).

Holdings

VGT - Holdings

VGT HoldingsWeight
Apple Inc19.58%
Microsoft Corp16.53%
NVIDIA Corp4.22%
Visa Inc Class A3.16%
PayPal Holdings Inc2.76%
Mastercard Inc Class A2.76%
Adobe Inc2.39%
Intel Corp1.94%
Salesforce.com Inc1.91%
Cisco Systems Inc1.9%

VGT’s Top Holdings are Apple Inc, Microsoft Corp, NVIDIA Corp, Visa Inc Class A, and PayPal Holdings Inc at 19.58%, 16.53%, 4.22%, 3.16%, and 2.76%.

Mastercard Inc Class A (2.76%), Adobe Inc (2.39%), and Intel Corp (1.94%) have a slightly smaller but still significant weight. Salesforce.com Inc and Cisco Systems Inc are also represented in the VGT’s holdings at 1.91% and 1.9%.

XLC - Holdings

XLC HoldingsWeight
Facebook Inc A23.75%
Alphabet Inc A11.49%
Alphabet Inc Class C11.16%
Netflix Inc4.78%
Charter Communications Inc A4.65%
Comcast Corp Class A4.44%
T-Mobile US Inc4.41%
The Walt Disney Co4.39%
AT&T Inc4.35%
Verizon Communications Inc4.33%

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

VGTXLC
Mean Return1.760
R-squared74.840
Std. Deviation16.610
Alpha10.410
Beta1.020
Sharpe Ratio1.230
Treynor Ratio20.550

The Vanguard Information Technology Index Fund ETF Shares (VGT) has a Treynor Ratio of 20.55 with a Mean Return of 1.76 and a Standard Deviation of 16.61. Its R-squared is 74.84 while VGT’s Alpha is 10.41. Furthermore, the fund has a Beta of 1.02 and a Sharpe Ratio of 1.23.

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

VGT’s Mean Return is 1.76 points higher than that of XLC and its R-squared is 74.84 points higher. With a Standard Deviation of 16.61, VGT is slightly more volatile than XLC. The Alpha and Beta of VGT are 10.41 points higher and 1.02 points higher than XLC’s Alpha and Beta.

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Performance

Annual Returns

VGT vs. XLC - Annual Returns

YearVGTXLC
202045.94%26.85%
201948.68%31.22%
20182.52%0.0%
201737.07%0.0%
201613.73%0.0%
20155.02%0.0%
201418.01%0.0%
201330.91%0.0%
201214.05%0.0%
20110.52%0.0%
201012.74%0.0%

VGT had its best year in 2019 with an annual return of 48.68%. VGT’s worst year over the past decade yielded 0.52% and occurred in 2011. In most years the Vanguard Information Technology Index Fund ETF Shares provided moderate returns such as in 2016, 2012, and 2014 where annual returns amounted to 13.73%, 14.05%, and 18.01% 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

VGT vs. XLC - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
VGT$10,000$21,69820.84%
XLC$10,000$16,64529.04%

A $10,000 investment in VGT would have resulted in a final balance of $21,698. This is a profit of $11,698 over 2 years and amounts to a compound annual growth rate (CAGR) of 20.84%.

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%.

VGT’s CAGR is 8.20 percentage points lower than that of XLC and as a result, would have yielded $5,053 more on a $10,000 investment. Thus, VGT performed worse than XLC by 8.20% annually.


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