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VGT vs. XLY: What’s The Difference?

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

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

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

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Summary

VGTXLY
NameVanguard Information Technology Index Fund ETF SharesConsumer Discretionary Select Sector SPDR Fund
CategoryTechnologyConsumer Cyclical
IssuerVanguardSPDR State Street Global Advisors
AUM54.13B20.21B
Avg. Return20.84%18.86%
Div. Yield0.66%0.63%
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 Consumer Discretionary Select Sector SPDR Fund (XLY) is a Consumer Cyclical fund that is issued by SPDR State Street Global Advisors. It currently has 20.21B total assets under management and has yielded an average annual return of 18.86% over the past 10 years. The fund has a dividend yield of 0.63% with an expense ratio of 0.12%.

VGT’s dividend yield is 0.03% higher than that of XLY (0.66% vs. 0.63%). Also, VGT yielded on average 1.97% more per year over the past decade (20.84% vs. 18.86%). The expense ratio of VGT is 0.02 percentage points lower than XLY’s (0.1% vs. 0.12%).

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Fund Composition

Industry Exposure

VGT vs. XLY - Industry Exposure

VGTXLY
Technology88.89%0.57%
Industrials1.67%0.0%
Energy0.0%0.0%
Communication Services0.61%0.0%
Utilities0.0%0.0%
Healthcare0.0%0.0%
Consumer Defensive0.0%5.34%
Real Estate0.0%0.0%
Financial Services8.83%0.0%
Consumer Cyclical0.0%94.1%
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 Consumer Discretionary Select Sector SPDR Fund (XLY) has the most exposure to the Consumer Cyclical sector at 94.1%. This is followed by Consumer Defensive and Technology at 5.34% and 0.57% respectively. Financial Services (0.0%), Real Estate (0.0%), and Healthcare (0.0%) only make up 0.00% of the fund’s total assets.

XLY’s mid-section with moderate exposure is comprised of Utilities, Communication Services, Energy, Industrials, and Technology stocks at 0.0%, 0.0%, 0.0%, 0.0%, and 0.57%.

VGT is 88.32% more exposed to the Technology sector than XLY (88.89% vs 0.57%). 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 99.44% less of the fund’s holdings compared to XLY (0.00% vs. 99.44%).

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%.

XLY - Holdings

XLY HoldingsWeight
Amazon.com Inc22.9%
Tesla Inc13.5%
The Home Depot Inc8.74%
McDonald’s Corp4.5%
Nike Inc B4.45%
Lowe’s Companies Inc3.58%
Starbucks Corp3.44%
Target Corp3.12%
Booking Holdings Inc2.35%
TJX Companies Inc2.12%

XLY’s Top Holdings are Amazon.com Inc, Tesla Inc, The Home Depot Inc, McDonald’s Corp, and Nike Inc B at 22.9%, 13.5%, 8.74%, 4.5%, and 4.45%.

Lowe’s Companies Inc (3.58%), Starbucks Corp (3.44%), and Target Corp (3.12%) have a slightly smaller but still significant weight. Booking Holdings Inc and TJX Companies Inc are also represented in the XLY’s holdings at 2.35% and 2.12%.

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Risk Analysis

VGTXLY
Mean Return1.761.47
R-squared74.8480.84
Std. Deviation16.6115.97
Alpha10.416.96
Beta1.021.02
Sharpe Ratio1.231.06
Treynor Ratio20.5516.69

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

The Consumer Discretionary Select Sector SPDR Fund (XLY) has a R-squared of 80.84 with a Sharpe Ratio of 1.06 and a Treynor Ratio of 16.69. Its Standard Deviation is 15.97 while XLY’s Mean Return is 1.47. Furthermore, the fund has a Alpha of 6.96 and a Beta of 1.02.

VGT’s Mean Return is 0.29 points higher than that of XLY and its R-squared is 6.00 points lower. With a Standard Deviation of 16.61, VGT is slightly more volatile than XLY. The Alpha and Beta of VGT are 3.45 points higher and 0.00 points lower than XLY’s Alpha and Beta.

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Performance

Annual Returns

VGT vs. XLY - Annual Returns

YearVGTXLY
202045.94%29.66%
201948.68%28.43%
20182.52%1.66%
201737.07%22.77%
201613.73%5.87%
20155.02%9.93%
201418.01%9.49%
201330.91%42.74%
201214.05%23.6%
20110.52%5.98%
201012.74%27.36%

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 XLY, returning 42.74% on an annual basis. The poorest year for XLY in the last ten years was 2018, with a yield of 1.66%. Most years the Consumer Discretionary Select Sector SPDR Fund has given investors modest returns, such as in 2015, 2017, and 2012, when gains were 9.93%, 22.77%, and 23.6% respectively.

Portfolio Growth

VGT vs. XLY - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
VGT$10,000$72,71820.84%
XLY$10,000$63,06618.86%

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 XLY, the end total would have been $63,066. This equates to a $53,066 profit over 11 years and a compound annual growth rate (CAGR) of 18.86%.

VGT’s CAGR is 1.97 percentage points higher than that of XLY and as a result, would have yielded $9,652 more on a $10,000 investment. Thus, VGT outperformed XLY by 1.97% annually.


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