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VGT vs. XLV: What’s The Difference?

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

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

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

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Summary

VGTXLV
NameVanguard Information Technology Index Fund ETF SharesHealth Care Select Sector SPDR Fund
CategoryTechnologyHealth
IssuerVanguardSPDR State Street Global Advisors
AUM54.13B27.88B
Avg. Return20.84%15.02%
Div. Yield0.66%1.4%
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 Health Care Select Sector SPDR Fund (XLV) is a Health fund that is issued by SPDR State Street Global Advisors. It currently has 27.88B total assets under management and has yielded an average annual return of 15.02% over the past 10 years. The fund has a dividend yield of 1.4% with an expense ratio of 0.12%.

VGT’s dividend yield is 0.74% lower than that of XLV (0.66% vs. 1.4%). Also, VGT yielded on average 5.81% more per year over the past decade (20.84% vs. 15.02%). The expense ratio of VGT is 0.02 percentage points lower than XLV’s (0.1% vs. 0.12%).

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Fund Composition

Industry Exposure

VGT vs. XLV - Industry Exposure

VGTXLV
Technology88.89%0.0%
Industrials1.67%0.0%
Energy0.0%0.0%
Communication Services0.61%0.0%
Utilities0.0%0.0%
Healthcare0.0%100.0%
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 Health Care Select Sector SPDR Fund (XLV) has the most exposure to the Healthcare 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.

XLV’s mid-section with moderate exposure is comprised of Consumer Defensive, 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 XLV (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 XLV (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%.

XLV - Holdings

XLV HoldingsWeight
Johnson & Johnson9.19%
UnitedHealth Group Inc8.01%
Pfizer Inc4.64%
Abbott Laboratories4.36%
AbbVie Inc4.21%
Thermo Fisher Scientific Inc4.2%
Merck & Co Inc4.17%
Eli Lilly and Co3.87%
Danaher Corp3.61%
Medtronic PLC3.54%

XLV’s Top Holdings are Johnson & Johnson, UnitedHealth Group Inc, Pfizer Inc, Abbott Laboratories, and AbbVie Inc at 9.19%, 8.01%, 4.64%, 4.36%, and 4.21%.

Thermo Fisher Scientific Inc (4.2%), Merck & Co Inc (4.17%), and Eli Lilly and Co (3.87%) have a slightly smaller but still significant weight. Danaher Corp and Medtronic PLC are also represented in the XLV’s holdings at 3.61% and 3.54%.

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Risk Analysis

VGTXLV
Mean Return1.761.27
R-squared74.8458.19
Std. Deviation16.6112.94
Alpha10.417.75
Beta1.020.7
Sharpe Ratio1.231.13
Treynor Ratio20.5521.1

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

The Health Care Select Sector SPDR Fund (XLV) has a Alpha of 7.75 with a R-squared of 58.19 and a Standard Deviation of 12.94. Its Beta is 0.7 while XLV’s Treynor Ratio is 21.1. Furthermore, the fund has a Mean Return of 1.27 and a Sharpe Ratio of 1.13.

VGT’s Mean Return is 0.49 points higher than that of XLV and its R-squared is 16.65 points higher. With a Standard Deviation of 16.61, VGT is slightly more volatile than XLV. The Alpha and Beta of VGT are 2.66 points higher and 0.32 points higher than XLV’s Alpha and Beta.

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Performance

Annual Returns

VGT vs. XLV - Annual Returns

YearVGTXLV
202045.94%13.33%
201948.68%20.63%
20182.52%6.3%
201737.07%21.7%
201613.73%-2.83%
20155.02%6.82%
201418.01%25.17%
201330.91%41.24%
201214.05%17.56%
20110.52%12.44%
201012.74%2.91%

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 XLV, returning 41.24% on an annual basis. The poorest year for XLV in the last ten years was 2016, with a yield of -2.83%. Most years the Health Care Select Sector SPDR Fund has given investors modest returns, such as in 2011, 2020, and 2012, when gains were 12.44%, 13.33%, and 17.56% respectively.

Portfolio Growth

VGT vs. XLV - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
VGT$10,000$72,71820.84%
XLV$10,000$44,14715.02%

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 XLV, the end total would have been $44,147. This equates to a $34,147 profit over 11 years and a compound annual growth rate (CAGR) of 15.02%.

VGT’s CAGR is 5.81 percentage points higher than that of XLV and as a result, would have yielded $28,571 more on a $10,000 investment. Thus, VGT outperformed XLV by 5.81% annually.


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