The Vanguard Dividend Appreciation Index Fund ETF Shares (VIG) and the Technology Select Sector SPDR Fund (XLK) are both among the Top 100 ETFs. VIG is a Vanguard Large Blend fund and XLK is a SPDR State Street Global Advisors Technology fund. So, what’s the difference between VIG and XLK? And which fund is better?
The expense ratio of VIG is 0.06 percentage points lower than XLK’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 lower returns than XLK over the past ten years.
In this article, we’ll compare VIG vs. XLK. We’ll look at fund composition and annual returns, as well as at their risk metrics and holdings. Moreover, I’ll also discuss VIG’s and XLK’s performance, portfolio growth, and industry exposure and examine how these affect their overall returns.
|Name||Vanguard Dividend Appreciation Index Fund ETF Shares||Technology 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 Technology Select Sector SPDR Fund (XLK) is a Technology fund that is issued by SPDR State Street Global Advisors. It currently has 42.3B total assets under management and has yielded an average annual return of 20.02% over the past 10 years. The fund has a dividend yield of 0.73% with an expense ratio of 0.12%.
VIG’s dividend yield is 0.83% higher than that of XLK (1.56% vs. 0.73%). Also, VIG yielded on average 6.68% less per year over the past decade (13.35% vs. 20.02%). The expense ratio of VIG is 0.06 percentage points lower than XLK’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 Technology Select Sector SPDR Fund (XLK) has the most exposure to the Technology sector at 87.54%. This is followed by Financial Services and Industrials at 10.71% and 1.75% 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.
XLK’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 1.75%.
VIG is 15.48% more exposed to the Industrials sector than XLK (17.23% vs 1.75%). VIG’s exposure to Financial Services and Healthcare stocks is 6.47% higher and 15.52% higher respectively (17.18% vs. 10.71% 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 XLK (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%.
|Visa Inc Class A||3.95%|
|PayPal Holdings Inc||3.42%|
|Mastercard Inc A||3.19%|
|Cisco Systems Inc||2.23%|
XLK’s Top Holdings are Apple Inc, Microsoft Corp, NVIDIA Corp, Visa Inc Class A, and PayPal Holdings Inc at 21.45%, 20.37%, 4.98%, 3.95%, and 3.42%.
Mastercard Inc A (3.19%), Adobe Inc (2.8%), and Salesforce.com Inc (2.26%) have a slightly smaller but still significant weight. Intel Corp and Cisco Systems Inc are also represented in the XLK’s holdings at 2.26% and 2.23%.
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The Vanguard Dividend Appreciation Index Fund ETF Shares (VIG) has a R-squared of 92.2 with a Mean Return of 1.09 and a Sharpe Ratio of 1.01. Its Beta is 0.86 while VIG’s Standard Deviation is 12.25. Furthermore, the fund has a Treynor Ratio of 14.33 and a Alpha of 0.12.
The Technology Select Sector SPDR Fund (XLK) has a Standard Deviation of 15.58 with a R-squared of 73.56 and a Treynor Ratio of 21.44. Its Alpha is 10.43 while XLK’s Mean Return is 1.7. Furthermore, the fund has a Beta of 0.95 and a Sharpe Ratio of 1.27.
VIG’s Mean Return is 0.61 points lower than that of XLK and its R-squared is 18.64 points higher. With a Standard Deviation of 12.25, VIG is slightly less volatile than XLK. The Alpha and Beta of VIG are 10.31 points lower and 0.09 points lower than XLK’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 2019 was the strongest year for XLK, returning 49.97% on an annual basis. The poorest year for XLK in the last ten years was 2018, with a yield of -1.56%. Most years the Technology Select Sector SPDR Fund has given investors modest returns, such as in 2016, 2012, and 2014, when gains were 14.81%, 15.47%, and 17.75% 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 XLK, the end total would have been $67,790. This equates to a $57,790 profit over 11 years and a compound annual growth rate (CAGR) of 20.02%.
VIG’s CAGR is 6.68 percentage points lower than that of XLK and as a result, would have yielded $29,839 less on a $10,000 investment. Thus, VIG performed worse than XLK by 6.68% annually.
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