The Vanguard Information Technology Index Fund ETF Shares (VGT) and the Technology Select Sector SPDR Fund (XLK) are both among the Top 100 ETFs. VGT is a Vanguard Technology fund and XLK is a SPDR State Street Global Advisors Technology fund. So, what’s the difference between VGT and XLK? And which fund is better?
The expense ratio of VGT is 0.02 percentage points lower than XLK’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 higher returns than XLK over the past ten years.
In this article, we’ll compare VGT vs. XLK. We’ll look at risk metrics and holdings, as well as at their fund composition and industry exposure. Moreover, I’ll also discuss VGT’s and XLK’s performance, annual returns, and portfolio growth and examine how these affect their overall returns.
|Name||Vanguard Information Technology Index Fund ETF Shares||Technology 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 Technology Select Sector SPDR Fund (XLK) is a Technology fund that is issued by SPDR State Street Global Advisors. It currently has 42.3B total assets under management and has yielded an average annual return of 20.02% over the past 10 years. The fund has a dividend yield of 0.73% with an expense ratio of 0.12%.
VGT’s dividend yield is 0.07% lower than that of XLK (0.66% vs. 0.73%). Also, VGT yielded on average 0.81% more per year over the past decade (20.84% vs. 20.02%). The expense ratio of VGT is 0.02 percentage points lower than XLK’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 Technology Select Sector SPDR Fund (XLK) has the most exposure to the Technology sector at 87.54%. This is followed by Financial Services and Industrials at 10.71% and 1.75% 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.
XLK’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 1.75%.
VGT is 1.35% more exposed to the Technology sector than XLK (88.89% vs 87.54%). VGT’s exposure to Financial Services and Industrials stocks is 1.88% lower and 0.08% lower respectively (8.83% vs. 10.71% and 1.67% vs. 1.75%). In total, Consumer Cyclical, Real Estate, and Consumer Defensive also make up 0.00% less of the fund’s holdings compared to XLK (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%.
|Visa Inc Class A||3.95%|
|PayPal Holdings Inc||3.42%|
|Mastercard Inc A||3.19%|
|Cisco Systems Inc||2.23%|
XLK’s Top Holdings are Apple Inc, Microsoft Corp, NVIDIA Corp, Visa Inc Class A, and PayPal Holdings Inc at 21.45%, 20.37%, 4.98%, 3.95%, and 3.42%.
Mastercard Inc A (3.19%), Adobe Inc (2.8%), and Salesforce.com Inc (2.26%) have a slightly smaller but still significant weight. Intel Corp and Cisco Systems Inc are also represented in the XLK’s holdings at 2.26% and 2.23%.
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The Vanguard Information Technology Index Fund ETF Shares (VGT) has a R-squared of 74.84 with a Standard Deviation of 16.61 and a Alpha of 10.41. Its Treynor Ratio is 20.55 while VGT’s Sharpe Ratio is 1.23. Furthermore, the fund has a Mean Return of 1.76 and a Beta of 1.02.
The Technology Select Sector SPDR Fund (XLK) has a Alpha of 10.43 with a Beta of 0.95 and a Standard Deviation of 15.58. Its Treynor Ratio is 21.44 while XLK’s Mean Return is 1.7. Furthermore, the fund has a R-squared of 73.56 and a Sharpe Ratio of 1.27.
VGT’s Mean Return is 0.06 points higher than that of XLK and its R-squared is 1.28 points higher. With a Standard Deviation of 16.61, VGT is slightly more volatile than XLK. The Alpha and Beta of VGT are 0.02 points lower and 0.07 points higher than XLK’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 2019 was the strongest year for XLK, returning 49.97% on an annual basis. The poorest year for XLK in the last ten years was 2018, with a yield of -1.56%. Most years the Technology Select Sector SPDR Fund has given investors modest returns, such as in 2016, 2012, and 2014, when gains were 14.81%, 15.47%, and 17.75% 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 XLK, the end total would have been $67,790. This equates to a $57,790 profit over 11 years and a compound annual growth rate (CAGR) of 20.02%.
VGT’s CAGR is 0.81 percentage points higher than that of XLK and as a result, would have yielded $4,928 more on a $10,000 investment. Thus, VGT outperformed XLK by 0.81% annually.
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