The Vanguard Dividend Appreciation Index Fund ETF Shares (VIG) and the Consumer Discretionary Select Sector SPDR Fund (XLY) are both among the Top 100 ETFs. VIG is a Vanguard Large Blend fund and XLY is a SPDR State Street Global Advisors Consumer Cyclical fund. So, what’s the difference between VIG and XLY? And which fund is better?
The expense ratio of VIG is 0.06 percentage points lower than XLY’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 XLY over the past ten years.
In this article, we’ll compare VIG vs. XLY. We’ll look at performance and holdings, as well as at their fund composition and annual returns. Moreover, I’ll also discuss VIG’s and XLY’s industry exposure, portfolio growth, and risk metrics and examine how these affect their overall returns.
|Name||Vanguard Dividend Appreciation Index Fund ETF Shares||Consumer Discretionary Select Sector SPDR Fund|
|Category||Large Blend||Consumer Cyclical|
|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 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%.
VIG’s dividend yield is 0.93% higher than that of XLY (1.56% vs. 0.63%). Also, VIG yielded on average 5.52% less per year over the past decade (13.35% vs. 18.86%). The expense ratio of VIG is 0.06 percentage points lower than XLY’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 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%.
VIG is 17.23% more exposed to the Industrials sector than XLY (17.23% vs 0.0%). 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 XLY (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%.
|The Home Depot Inc||8.74%|
|Nike Inc B||4.45%|
|Lowe’s Companies Inc||3.58%|
|Booking Holdings Inc||2.35%|
|TJX Companies Inc||2.12%|
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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The Vanguard Dividend Appreciation Index Fund ETF Shares (VIG) has a Sharpe Ratio of 1.01 with a Alpha of 0.12 and a Standard Deviation of 12.25. Its Beta is 0.86 while VIG’s Treynor Ratio is 14.33. Furthermore, the fund has a R-squared of 92.2 and a Mean Return of 1.09.
The Consumer Discretionary Select Sector SPDR Fund (XLY) has a Mean Return of 1.47 with a Alpha of 6.96 and a R-squared of 80.84. Its Sharpe Ratio is 1.06 while XLY’s Beta is 1.02. Furthermore, the fund has a Standard Deviation of 15.97 and a Treynor Ratio of 16.69.
VIG’s Mean Return is 0.38 points lower than that of XLY and its R-squared is 11.36 points higher. With a Standard Deviation of 12.25, VIG is slightly less volatile than XLY. The Alpha and Beta of VIG are 6.84 points lower and 0.16 points lower than XLY’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 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.
|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 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%.
VIG’s CAGR is 5.52 percentage points lower than that of XLY and as a result, would have yielded $25,115 less on a $10,000 investment. Thus, VIG performed worse than XLY by 5.52% annually.
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