The Vanguard Dividend Appreciation Index Fund ETF Shares (VIG) and the Financial Select Sector SPDR Fund (XLF) are both among the Top 100 ETFs. VIG is a Vanguard Large Blend fund and XLF is a SPDR State Street Global Advisors Financial fund. So, what’s the difference between VIG and XLF? And which fund is better?
The expense ratio of VIG is 0.06 percentage points lower than XLF’s (0.06% vs. 0.12%). VIG also has a higher exposure to the industrials sector and a lower standard deviation. Overall, VIG has provided higher returns than XLF over the past ten years.
In this article, we’ll compare VIG vs. XLF. We’ll look at portfolio growth and fund composition, as well as at their industry exposure and holdings. Moreover, I’ll also discuss VIG’s and XLF’s performance, risk metrics, and annual returns and examine how these affect their overall returns.
|Name||Vanguard Dividend Appreciation Index Fund ETF Shares||Financial Select Sector SPDR Fund|
|Issuer||Vanguard||SPDR State Street Global Advisors|
The Vanguard Dividend Appreciation Index Fund ETF Shares (VIG) is a Large Blend fund that is issued by Vanguard. It currently has 71.92B total assets under management and has yielded an average annual return of 13.35% over the past 10 years. The fund has a dividend yield of 1.56% with an expense ratio of 0.06%.
The Financial Select Sector SPDR Fund (XLF) is a Financial fund that is issued by SPDR State Street Global Advisors. It currently has 40.81B total assets under management and has yielded an average annual return of 12.17% over the past 10 years. The fund has a dividend yield of 1.57% with an expense ratio of 0.12%.
VIG’s dividend yield is 0.01% lower than that of XLF (1.56% vs. 1.57%). Also, VIG yielded on average 1.18% more per year over the past decade (13.35% vs. 12.17%). The expense ratio of VIG is 0.06 percentage points lower than XLF’s (0.06% vs. 0.12%).
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The Vanguard Dividend Appreciation Index Fund ETF Shares (VIG) has the most exposure to the Industrials sector at 17.23%. This is followed by Financial Services and Healthcare at 17.18% and 15.52% respectively. Energy (0.0%), Utilities (2.81%), and Communication Services (2.86%) only make up 5.67% of the fund’s total assets.
VIG’s mid-section with moderate exposure is comprised of Basic Materials, Consumer Cyclical, Technology, Consumer Defensive, and Healthcare stocks at 3.67%, 10.47%, 14.93%, 15.32%, and 15.52%.
The Financial Select Sector SPDR Fund (XLF) has the most exposure to the Financial Services sector at 100.0%. This is followed by Technology and Industrials at 0.0% and 0.0% 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.
XLF’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 0.0%.
VIG is 17.23% more exposed to the Industrials sector than XLF (17.23% vs 0.0%). VIG’s exposure to Financial Services and Healthcare stocks is 82.82% lower and 15.52% higher respectively (17.18% vs. 100.0% and 15.52% vs. 0.0%). In total, Energy, Utilities, and Communication Services also make up 5.67% more of the fund’s holdings compared to XLF (5.67% vs. 0.00%).
|JPMorgan Chase & Co||3.8%|
|Johnson & Johnson||3.67%|
|Visa Inc Class A||3.22%|
|UnitedHealth Group Inc||3.22%|
|The Home Depot Inc||2.91%|
|Procter & Gamble Co||2.82%|
|Comcast Corp Class A||2.21%|
VIG’s Top Holdings are Microsoft Corp, JPMorgan Chase & Co, Johnson & Johnson, Walmart Inc, and Visa Inc Class A at 4.19%, 3.8%, 3.67%, 3.38%, and 3.22%.
UnitedHealth Group Inc (3.22%), The Home Depot Inc (2.91%), and Procter & Gamble Co (2.82%) have a slightly smaller but still significant weight. Comcast Corp Class A and Coca-Cola Co are also represented in the VIG’s holdings at 2.21% and 1.98%.
|Berkshire Hathaway Inc Class B||12.83%|
|JPMorgan Chase & Co||11.47%|
|Bank of America Corp||7.57%|
|Wells Fargo & Co||4.56%|
|Goldman Sachs Group Inc||3.15%|
|Charles Schwab Corp||2.66%|
|American Express Co||2.62%|
XLF’s Top Holdings are Berkshire Hathaway Inc Class B, JPMorgan Chase & Co, Bank of America Corp, Wells Fargo & Co, and Citigroup Inc at 12.83%, 11.47%, 7.57%, 4.56%, and 3.56%.
Morgan Stanley (3.32%), Goldman Sachs Group Inc (3.15%), and BlackRock Inc (3.02%) have a slightly smaller but still significant weight. Charles Schwab Corp and American Express Co are also represented in the XLF’s holdings at 2.66% and 2.62%.
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The Vanguard Dividend Appreciation Index Fund ETF Shares (VIG) has a Sharpe Ratio of 1.01 with a Mean Return of 1.09 and a Treynor Ratio of 14.33. Its Beta is 0.86 while VIG’s Standard Deviation is 12.25. Furthermore, the fund has a Alpha of 0.12 and a R-squared of 92.2.
The Financial Select Sector SPDR Fund (XLF) has a R-squared of 73.26 with a Beta of 1.15 and a Mean Return of 1.21. Its Standard Deviation is 18.86 while XLF’s Sharpe Ratio is 0.74. Furthermore, the fund has a Alpha of 2.63 and a Treynor Ratio of 11.25.
VIG’s Mean Return is 0.12 points lower than that of XLF and its R-squared is 18.94 points higher. With a Standard Deviation of 12.25, VIG is slightly less volatile than XLF. The Alpha and Beta of VIG are 2.51 points lower and 0.29 points lower than XLF’s Alpha and Beta.
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VIG had its best year in 2019 with an annual return of 29.71%. VIG’s worst year over the past decade yielded -2.02% and occurred in 2018. In most years the Vanguard Dividend Appreciation Index Fund ETF Shares provided moderate returns such as in 2012, 2016, and 2010 where annual returns amounted to 11.61%, 11.84%, and 14.67% respectively.
The year 2013 was the strongest year for XLF, returning 35.37% on an annual basis. The poorest year for XLF in the last ten years was 2011, with a yield of -17.16%. Most years the Financial Select Sector SPDR Fund has given investors modest returns, such as in 2010, 2014, and 2017, when gains were 11.97%, 15.02%, and 22.03% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in VIG would have resulted in a final balance of $37,951. This is a profit of $27,951 over 11 years and amounts to a compound annual growth rate (CAGR) of 13.35%.
With a $10,000 investment in XLF, the end total would have been $30,782. This equates to a $20,782 profit over 11 years and a compound annual growth rate (CAGR) of 12.17%.
VIG’s CAGR is 1.18 percentage points higher than that of XLF and as a result, would have yielded $7,169 more on a $10,000 investment. Thus, VIG outperformed XLF by 1.18% annually.
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