The Vanguard Health Care Index Fund ETF Shares (VHT) and the Communication Services Select Sector SPDR Fund (XLC) are both among the Top 100 ETFs. VHT is a Vanguard Health fund and XLC is a SPDR State Street Global Advisors Communications fund. So, what’s the difference between VHT and XLC? And which fund is better?
The expense ratio of VHT is 0.02 percentage points lower than XLC’s (0.1% vs. 0.12%). VHT also has a higher exposure to the healthcare sector and a higher standard deviation. Overall, VHT has provided lower returns than XLC over the past 2 years.
In this article, we’ll compare VHT vs. XLC. We’ll look at performance and annual returns, as well as at their industry exposure and portfolio growth. Moreover, I’ll also discuss VHT’s and XLC’s risk metrics, holdings, and fund composition and examine how these affect their overall returns.
Summary
| VHT | XLC | |
| Name | Vanguard Health Care Index Fund ETF Shares | Communication Services Select Sector SPDR Fund |
| Category | Health | Communications |
| Issuer | Vanguard | SPDR State Street Global Advisors |
| AUM | 17.94B | 14.09B |
| Avg. Return | 16.04% | 29.04% |
| Div. Yield | 1.15% | 0.62% |
| Expense Ratio | 0.1% | 0.12% |
The Vanguard Health Care Index Fund ETF Shares (VHT) is a Health fund that is issued by Vanguard. It currently has 17.94B total assets under management and has yielded an average annual return of 16.04% over the past 10 years. The fund has a dividend yield of 1.15% with an expense ratio of 0.1%.
The Communication Services Select Sector SPDR Fund (XLC) is a Communications fund that is issued by SPDR State Street Global Advisors. It currently has 14.09B total assets under management and has yielded an average annual return of 29.04% over the past 10 years. The fund has a dividend yield of 0.62% with an expense ratio of 0.12%.
VHT’s dividend yield is 0.53% higher than that of XLC (1.15% vs. 0.62%). Also, VHT yielded on average 13.00% less per year over the past decade (16.04% vs. 29.04%). The expense ratio of VHT is 0.02 percentage points lower than XLC’s (0.1% vs. 0.12%).
Fund Composition
Industry Exposure
| VHT | XLC | |
| Technology | 0.05% | 0.0% |
| Industrials | 0.05% | 0.0% |
| Energy | 0.0% | 0.0% |
| Communication Services | 0.0% | 100.0% |
| Utilities | 0.0% | 0.0% |
| Healthcare | 99.57% | 0.0% |
| Consumer Defensive | 0.0% | 0.0% |
| Real Estate | 0.0% | 0.0% |
| Financial Services | 0.02% | 0.0% |
| Consumer Cyclical | 0.0% | 0.0% |
| Basic Materials | 0.31% | 0.0% |
The Vanguard Health Care Index Fund ETF Shares (VHT) has the most exposure to the Healthcare sector at 99.57%. This is followed by Basic Materials and Technology at 0.31% and 0.05% respectively. Real Estate (0.0%), Consumer Defensive (0.0%), and Utilities (0.0%) only make up 0.00% of the fund’s total assets.
VHT’s mid-section with moderate exposure is comprised of Communication Services, Energy, Financial Services, Industrials, and Technology stocks at 0.0%, 0.0%, 0.02%, 0.05%, and 0.05%.
The Communication Services Select Sector SPDR Fund (XLC) has the most exposure to the Communication Services 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.
XLC’s mid-section with moderate exposure is comprised of Consumer Defensive, Healthcare, Utilities, Energy, and Industrials stocks at 0.0%, 0.0%, 0.0%, 0.0%, and 0.0%.
VHT is 99.57% more exposed to the Healthcare sector than XLC (99.57% vs 0.0%). VHT’s exposure to Basic Materials and Technology stocks is 0.31% higher and 0.05% higher respectively (0.31% vs. 0.0% and 0.05% vs. 0.0%). In total, Real Estate, Consumer Defensive, and Utilities also make up 0.00% less of the fund’s holdings compared to XLC (0.00% vs. 0.00%).
Holdings
| VHT Holdings | Weight |
| Johnson & Johnson | 7.34% |
| UnitedHealth Group Inc | 6.44% |
| Pfizer Inc | 3.7% |
| Abbott Laboratories | 3.48% |
| Thermo Fisher Scientific Inc | 3.37% |
| AbbVie Inc | 3.37% |
| Merck & Co Inc | 3.33% |
| Eli Lilly and Co | 3.17% |
| Danaher Corp | 2.91% |
| Medtronic PLC | 2.83% |
VHT’s Top Holdings are Johnson & Johnson, UnitedHealth Group Inc, Pfizer Inc, Abbott Laboratories, and Thermo Fisher Scientific Inc at 7.34%, 6.44%, 3.7%, 3.48%, and 3.37%.
AbbVie Inc (3.37%), Merck & Co Inc (3.33%), and Eli Lilly and Co (3.17%) have a slightly smaller but still significant weight. Danaher Corp and Medtronic PLC are also represented in the VHT’s holdings at 2.91% and 2.83%.
| XLC Holdings | Weight |
| Facebook Inc A | 23.75% |
| Alphabet Inc A | 11.49% |
| Alphabet Inc Class C | 11.16% |
| Netflix Inc | 4.78% |
| Charter Communications Inc A | 4.65% |
| Comcast Corp Class A | 4.44% |
| T-Mobile US Inc | 4.41% |
| The Walt Disney Co | 4.39% |
| AT&T Inc | 4.35% |
| Verizon Communications Inc | 4.33% |
XLC’s Top Holdings are Facebook Inc A, Alphabet Inc A, Alphabet Inc Class C, Netflix Inc, and Charter Communications Inc A at 23.75%, 11.49%, 11.16%, 4.78%, and 4.65%.
Comcast Corp Class A (4.44%), T-Mobile US Inc (4.41%), and The Walt Disney Co (4.39%) have a slightly smaller but still significant weight. AT&T Inc and Verizon Communications Inc are also represented in the XLC’s holdings at 4.35% and 4.33%.
Risk Analysis
| VHT | XLC | |
| Mean Return | 1.33 | 0 |
| R-squared | 59.86 | 0 |
| Std. Deviation | 13.58 | 0 |
| Alpha | 7.99 | 0 |
| Beta | 0.75 | 0 |
| Sharpe Ratio | 1.13 | 0 |
| Treynor Ratio | 20.74 | 0 |
The Vanguard Health Care Index Fund ETF Shares (VHT) has a Alpha of 7.99 with a R-squared of 59.86 and a Sharpe Ratio of 1.13. Its Beta is 0.75 while VHT’s Mean Return is 1.33. Furthermore, the fund has a Standard Deviation of 13.58 and a Treynor Ratio of 20.74.
The Communication Services Select Sector SPDR Fund (XLC) has a Beta of 0 with a R-squared of 0 and a Treynor Ratio of 0. Its Mean Return is 0 while XLC’s Sharpe Ratio is 0. Furthermore, the fund has a Alpha of 0 and a Standard Deviation of 0.
VHT’s Mean Return is 1.33 points higher than that of XLC and its R-squared is 59.86 points higher. With a Standard Deviation of 13.58, VHT is slightly more volatile than XLC. The Alpha and Beta of VHT are 7.99 points higher and 0.75 points higher than XLC’s Alpha and Beta.
Performance
Annual Returns
| Year | VHT | XLC |
| 2020 | 18.21% | 26.85% |
| 2019 | 21.97% | 31.22% |
| 2018 | 5.55% | 0.0% |
| 2017 | 23.34% | 0.0% |
| 2016 | -3.33% | 0.0% |
| 2015 | 7.22% | 0.0% |
| 2014 | 25.38% | 0.0% |
| 2013 | 42.67% | 0.0% |
| 2012 | 19.1% | 0.0% |
| 2011 | 10.57% | 0.0% |
| 2010 | 5.75% | 0.0% |
VHT had its best year in 2013 with an annual return of 42.67%. VHT’s worst year over the past decade yielded -3.33% and occurred in 2016. In most years the Vanguard Health Care Index Fund ETF Shares provided moderate returns such as in 2011, 2020, and 2012 where annual returns amounted to 10.57%, 18.21%, and 19.1% respectively.
The year 2019 was the strongest year for XLC, returning 31.22% on an annual basis. The poorest year for XLC in the last ten years was 2018, with a yield of 0.0%. Most years the Communication Services Select Sector SPDR Fund has given investors modest returns, such as in 2014, 2013, and 2012, when gains were 0.0%, 0.0%, and 0.0% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| VHT | $10,000 | $14,418 | 16.04% |
| XLC | $10,000 | $16,645 | 29.04% |
A $10,000 investment in VHT would have resulted in a final balance of $14,418. This is a profit of $4,418 over 2 years and amounts to a compound annual growth rate (CAGR) of 16.04%.
With a $10,000 investment in XLC, the end total would have been $16,645. This equates to a $6,645 profit over 2 years and a compound annual growth rate (CAGR) of 29.04%.
VHT’s CAGR is 13.00 percentage points lower than that of XLC and as a result, would have yielded $2,227 less on a $10,000 investment. Thus, VHT performed worse than XLC by 13.00% annually.
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