VGT vs. XLI: What’s The Difference?

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

The expense ratio of VGT is 0.02 percentage points lower than XLI’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 XLI over the past ten years.

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

Summary

VGT XLI
Name Vanguard Information Technology Index Fund ETF Shares Industrial Select Sector SPDR Fund
Category Technology Industrials
Issuer Vanguard SPDR State Street Global Advisors
AUM 54.13B 19.33B
Avg. Return 20.84% 14.44%
Div. Yield 0.66% 1.25%
Expense Ratio 0.1% 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 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%.

VGT’s dividend yield is 0.59% lower than that of XLI (0.66% vs. 1.25%). Also, VGT yielded on average 6.39% more per year over the past decade (20.84% vs. 14.44%). The expense ratio of VGT is 0.02 percentage points lower than XLI’s (0.1% vs. 0.12%).

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Fund Composition

Industry Exposure

VGT vs. XLI - Industry Exposure

VGT XLI
Technology 88.89% 1.82%
Industrials 1.67% 97.49%
Energy 0.0% 0.0%
Communication Services 0.61% 0.0%
Utilities 0.0% 0.0%
Healthcare 0.0% 0.0%
Consumer Defensive 0.0% 0.0%
Real Estate 0.0% 0.0%
Financial Services 8.83% 0.0%
Consumer Cyclical 0.0% 0.69%
Basic Materials 0.0% 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 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%.

VGT is 87.07% more exposed to the Technology sector than XLI (88.89% vs 1.82%). VGT’s exposure to Financial Services and Industrials stocks is 8.83% higher and 95.82% lower respectively (8.83% vs. 0.0% and 1.67% vs. 97.49%). In total, Consumer Cyclical, Real Estate, and Consumer Defensive also make up 0.69% less of the fund’s holdings compared to XLI (0.00% vs. 0.69%).

Holdings

VGT - Holdings

VGT Holdings Weight
Apple Inc 19.58%
Microsoft Corp 16.53%
NVIDIA Corp 4.22%
Visa Inc Class A 3.16%
PayPal Holdings Inc 2.76%
Mastercard Inc Class A 2.76%
Adobe Inc 2.39%
Intel Corp 1.94%
Salesforce.com Inc 1.91%
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%.

XLI - Holdings

XLI Holdings Weight
Honeywell International Inc 4.9%
United Parcel Service Inc Class B 4.84%
Union Pacific Corp 4.7%
Boeing Co 4.24%
Raytheon Technologies Corp 4.16%
Caterpillar Inc 3.84%
General Electric Co 3.8%
3M Co 3.7%
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%.

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Risk Analysis

VGT XLI
Mean Return 1.76 1.14
R-squared 74.84 78.97
Std. Deviation 16.61 17.13
Alpha 10.41 2.38
Beta 1.02 1.08
Sharpe Ratio 1.23 0.76
Treynor Ratio 20.55 11.34

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

The Industrial Select Sector SPDR Fund (XLI) has a Sharpe Ratio of 0.76 with a Treynor Ratio of 11.34 and a Alpha of 2.38. Its Standard Deviation is 17.13 while XLI’s Beta is 1.08. Furthermore, the fund has a Mean Return of 1.14 and a R-squared of 78.97.

VGT’s Mean Return is 0.62 points higher than that of XLI and its R-squared is 4.13 points lower. With a Standard Deviation of 16.61, VGT is slightly less volatile than XLI. The Alpha and Beta of VGT are 8.03 points higher and 0.06 points lower than XLI’s Alpha and Beta.

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Performance

Annual Returns

VGT vs. XLI - Annual Returns

Year VGT XLI
2020 45.94% 11.0%
2019 48.68% 29.11%
2018 2.52% -13.1%
2017 37.07% 23.85%
2016 13.73% 19.93%
2015 5.02% -4.27%
2014 18.01% 10.44%
2013 30.91% 40.44%
2012 14.05% 14.86%
2011 0.52% -1.01%
2010 12.74% 27.62%

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 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.

Portfolio Growth

VGT vs. XLI - Portfolio Growth

Fund Initial Balance Final Balance CAGR
VGT $10,000 $72,718 20.84%
XLI $10,000 $39,853 14.44%

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 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%.

VGT’s CAGR is 6.39 percentage points higher than that of XLI and as a result, would have yielded $32,865 more on a $10,000 investment. Thus, VGT outperformed XLI by 6.39% annually.


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