The Vanguard Information Technology Index Fund ETF Shares (VGT) and the Financial Select Sector SPDR Fund (XLF) are both among the Top 100 ETFs. VGT is a Vanguard Technology fund and XLF is a SPDR State Street Global Advisors Financial fund. So, what’s the difference between VGT and XLF? And which fund is better?
The expense ratio of VGT is 0.02 percentage points lower than XLF’s (0.1% vs. 0.12%). VGT also has a higher exposure to the technology sector and a lower standard deviation. Overall, VGT has provided higher returns than XLF over the past ten years.
In this article, we’ll compare VGT vs. XLF. We’ll look at holdings and industry exposure, as well as at their portfolio growth and fund composition. Moreover, I’ll also discuss VGT’s and XLF’s risk metrics, performance, and annual returns and examine how these affect their overall returns.
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|Name||Vanguard Information Technology Index Fund ETF Shares||Financial Select Sector SPDR Fund|
|Issuer||Vanguard||SPDR State Street Global Advisors|
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 Financial Select Sector SPDR Fund (XLF) is a Financial fund that is issued by SPDR State Street Global Advisors. It currently has 40.81B total assets under management and has yielded an average annual return of 12.17% over the past 10 years. The fund has a dividend yield of 1.57% with an expense ratio of 0.12%.
VGT’s dividend yield is 0.91% lower than that of XLF (0.66% vs. 1.57%). Also, VGT yielded on average 8.67% more per year over the past decade (20.84% vs. 12.17%). The expense ratio of VGT is 0.02 percentage points lower than XLF’s (0.1% vs. 0.12%).
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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 Financial Select Sector SPDR Fund (XLF) has the most exposure to the Financial Services sector at 100.0%. This is followed by Technology and Industrials at 0.0% and 0.0% 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.
XLF’s mid-section with moderate exposure is comprised of Healthcare, Utilities, Communication Services, 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 XLF (88.89% vs 0.0%). VGT’s exposure to Financial Services and Industrials stocks is 91.17% lower and 1.67% higher respectively (8.83% vs. 100.0% 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 XLF (0.00% vs. 0.00%).
|Visa Inc Class A||3.16%|
|PayPal Holdings Inc||2.76%|
|Mastercard Inc Class A||2.76%|
|Cisco Systems Inc||1.9%|
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%.
|Berkshire Hathaway Inc Class B||12.83%|
|JPMorgan Chase & Co||11.47%|
|Bank of America Corp||7.57%|
|Wells Fargo & Co||4.56%|
|Goldman Sachs Group Inc||3.15%|
|Charles Schwab Corp||2.66%|
|American Express Co||2.62%|
XLF’s Top Holdings are Berkshire Hathaway Inc Class B, JPMorgan Chase & Co, Bank of America Corp, Wells Fargo & Co, and Citigroup Inc at 12.83%, 11.47%, 7.57%, 4.56%, and 3.56%.
Morgan Stanley (3.32%), Goldman Sachs Group Inc (3.15%), and BlackRock Inc (3.02%) have a slightly smaller but still significant weight. Charles Schwab Corp and American Express Co are also represented in the XLF’s holdings at 2.66% and 2.62%.
The Vanguard Information Technology Index Fund ETF Shares (VGT) has a Beta of 1.02 with a Sharpe Ratio of 1.23 and a Mean Return of 1.76. Its R-squared is 74.84 while VGT’s Alpha is 10.41. Furthermore, the fund has a Treynor Ratio of 20.55 and a Standard Deviation of 16.61.
The Financial Select Sector SPDR Fund (XLF) has a Beta of 1.15 with a Treynor Ratio of 11.25 and a Alpha of 2.63. Its R-squared is 73.26 while XLF’s Mean Return is 1.21. Furthermore, the fund has a Sharpe Ratio of 0.74 and a Standard Deviation of 18.86.
VGT’s Mean Return is 0.55 points higher than that of XLF and its R-squared is 1.58 points higher. With a Standard Deviation of 16.61, VGT is slightly less volatile than XLF. The Alpha and Beta of VGT are 7.78 points higher and 0.13 points lower than XLF’s Alpha and Beta.
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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 2013 was the strongest year for XLF, returning 35.37% on an annual basis. The poorest year for XLF in the last ten years was 2011, with a yield of -17.16%. Most years the Financial Select Sector SPDR Fund has given investors modest returns, such as in 2010, 2014, and 2017, when gains were 11.97%, 15.02%, and 22.03% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in VGT would have resulted in a final balance of $72,718. This is a profit of $62,718 over 11 years and amounts to a compound annual growth rate (CAGR) of 20.84%.
With a $10,000 investment in XLF, the end total would have been $30,782. This equates to a $20,782 profit over 11 years and a compound annual growth rate (CAGR) of 12.17%.
VGT’s CAGR is 8.67 percentage points higher than that of XLF and as a result, would have yielded $41,936 more on a $10,000 investment. Thus, VGT outperformed XLF by 8.67% annually.
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