VIG vs. XLI: What’s The Difference?

The Vanguard Dividend Appreciation Index Fund ETF Shares (VIG) and the Industrial Select Sector SPDR Fund (XLI) are both among the Top 100 ETFs. VIG is a Vanguard Large Blend fund and XLI is a SPDR State Street Global Advisors Industrials fund. So, what’s the difference between VIG and XLI? And which fund is better?

The expense ratio of VIG is 0.06 percentage points lower than XLI’s (0.06% vs. 0.12%). VIG also has a lower exposure to the industrials sector and a lower standard deviation. Overall, VIG has provided lower returns than XLI over the past ten years.

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

Summary

VIG XLI
Name Vanguard Dividend Appreciation Index Fund ETF Shares Industrial Select Sector SPDR Fund
Category Large Blend Industrials
Issuer Vanguard SPDR State Street Global Advisors
AUM 71.92B 19.33B
Avg. Return 13.35% 14.44%
Div. Yield 1.56% 1.25%
Expense Ratio 0.06% 0.12%

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 Industrial Select Sector SPDR Fund (XLI) is a Industrials fund that is issued by SPDR State Street Global Advisors. It currently has 19.33B total assets under management and has yielded an average annual return of 14.44% over the past 10 years. The fund has a dividend yield of 1.25% with an expense ratio of 0.12%.

VIG’s dividend yield is 0.31% higher than that of XLI (1.56% vs. 1.25%). Also, VIG yielded on average 1.10% less per year over the past decade (13.35% vs. 14.44%). The expense ratio of VIG is 0.06 percentage points lower than XLI’s (0.06% vs. 0.12%).

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Fund Composition

Industry Exposure

VIG vs. XLI - Industry Exposure

VIG XLI
Technology 14.93% 1.82%
Industrials 17.23% 97.49%
Energy 0.0% 0.0%
Communication Services 2.86% 0.0%
Utilities 2.81% 0.0%
Healthcare 15.52% 0.0%
Consumer Defensive 15.32% 0.0%
Real Estate 0.0% 0.0%
Financial Services 17.18% 0.0%
Consumer Cyclical 10.47% 0.69%
Basic Materials 3.67% 0.0%

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 Industrial Select Sector SPDR Fund (XLI) has the most exposure to the Industrials sector at 97.49%. This is followed by Technology and Consumer Cyclical at 1.82% and 0.69% respectively. Financial Services (0.0%), Real Estate (0.0%), and Consumer Defensive (0.0%) only make up 0.00% of the fund’s total assets.

XLI’s mid-section with moderate exposure is comprised of Healthcare, Utilities, Communication Services, Energy, and Consumer Cyclical stocks at 0.0%, 0.0%, 0.0%, 0.0%, and 0.69%.

VIG is 80.26% less exposed to the Industrials sector than XLI (17.23% vs 97.49%). VIG’s exposure to Financial Services and Healthcare stocks is 17.18% higher and 15.52% higher respectively (17.18% vs. 0.0% 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 XLI (5.67% vs. 0.00%).

Holdings

VIG - Holdings

VIG Holdings Weight
Microsoft Corp 4.19%
JPMorgan Chase & Co 3.8%
Johnson & Johnson 3.67%
Walmart Inc 3.38%
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%
Coca-Cola Co 1.98%

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%.

XLI - Holdings

XLI Holdings Weight
Honeywell International Inc 4.9%
United Parcel Service Inc Class B 4.84%
Union Pacific Corp 4.7%
Boeing Co 4.24%
Raytheon Technologies Corp 4.16%
Caterpillar Inc 3.84%
General Electric Co 3.8%
3M Co 3.7%
Deere & Co 3.54%
Lockheed Martin Corp 2.98%

XLI’s Top Holdings are Honeywell International Inc, United Parcel Service Inc Class B, Union Pacific Corp, Boeing Co, and Raytheon Technologies Corp at 4.9%, 4.84%, 4.7%, 4.24%, and 4.16%.

Caterpillar Inc (3.84%), General Electric Co (3.8%), and 3M Co (3.7%) have a slightly smaller but still significant weight. Deere & Co and Lockheed Martin Corp are also represented in the XLI’s holdings at 3.54% and 2.98%.

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Risk Analysis

VIG XLI
Mean Return 1.09 1.14
R-squared 92.2 78.97
Std. Deviation 12.25 17.13
Alpha 0.12 2.38
Beta 0.86 1.08
Sharpe Ratio 1.01 0.76
Treynor Ratio 14.33 11.34

The Vanguard Dividend Appreciation Index Fund ETF Shares (VIG) has a Standard Deviation of 12.25 with a Treynor Ratio of 14.33 and a Beta of 0.86. Its R-squared is 92.2 while VIG’s Alpha is 0.12. Furthermore, the fund has a Sharpe Ratio of 1.01 and a Mean Return of 1.09.

The Industrial Select Sector SPDR Fund (XLI) has a Sharpe Ratio of 0.76 with a Standard Deviation of 17.13 and a Alpha of 2.38. Its Mean Return is 1.14 while XLI’s R-squared is 78.97. Furthermore, the fund has a Treynor Ratio of 11.34 and a Beta of 1.08.

VIG’s Mean Return is 0.05 points lower than that of XLI and its R-squared is 13.23 points higher. With a Standard Deviation of 12.25, VIG is slightly less volatile than XLI. The Alpha and Beta of VIG are 2.26 points lower and 0.22 points lower than XLI’s Alpha and Beta.

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Performance

Annual Returns

VIG vs. XLI - Annual Returns

Year VIG XLI
2020 15.46% 11.0%
2019 29.71% 29.11%
2018 -2.02% -13.1%
2017 22.22% 23.85%
2016 11.84% 19.93%
2015 -1.95% -4.27%
2014 10.06% 10.44%
2013 28.99% 40.44%
2012 11.61% 14.86%
2011 6.21% -1.01%
2010 14.67% 27.62%

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 XLI, returning 40.44% on an annual basis. The poorest year for XLI in the last ten years was 2018, with a yield of -13.1%. Most years the Industrial Select Sector SPDR Fund has given investors modest returns, such as in 2020, 2012, and 2016, when gains were 11.0%, 14.86%, and 19.93% respectively.

Portfolio Growth

VIG vs. XLI - Portfolio Growth

Fund Initial Balance Final Balance CAGR
VIG $10,000 $37,951 13.35%
XLI $10,000 $39,853 14.44%

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 XLI, the end total would have been $39,853. This equates to a $29,853 profit over 11 years and a compound annual growth rate (CAGR) of 14.44%.

VIG’s CAGR is 1.10 percentage points lower than that of XLI and as a result, would have yielded $1,902 less on a $10,000 investment. Thus, VIG performed worse than XLI by 1.10% annually.


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