VO vs. XLC: What’s The Difference?

The Vanguard Mid-Cap Index Fund ETF Shares (VO) and the Communication Services Select Sector SPDR Fund (XLC) are both among the Top 100 ETFs. VO is a Vanguard Mid-Cap Blend fund and XLC is a SPDR State Street Global Advisors Communications fund. So, what’s the difference between VO and XLC? And which fund is better?

The expense ratio of VO is 0.08 percentage points lower than XLC’s (0.04% vs. 0.12%). VO also has a higher exposure to the technology sector and a higher standard deviation. Overall, VO has provided lower returns than XLC over the past ten years.

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

Summary

VO XLC
Name Vanguard Mid-Cap Index Fund ETF Shares Communication Services Select Sector SPDR Fund
Category Mid-Cap Blend Communications
Issuer Vanguard SPDR State Street Global Advisors
AUM 154.08B 14.09B
Avg. Return 14.34% 29.04%
Div. Yield 1.23% 0.62%
Expense Ratio 0.04% 0.12%

The Vanguard Mid-Cap Index Fund ETF Shares (VO) is a Mid-Cap Blend fund that is issued by Vanguard. It currently has 154.08B total assets under management and has yielded an average annual return of 14.34% over the past 10 years. The fund has a dividend yield of 1.23% with an expense ratio of 0.04%.

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%.

VO’s dividend yield is 0.61% higher than that of XLC (1.23% vs. 0.62%). Also, VO yielded on average 14.70% less per year over the past decade (14.34% vs. 29.04%). The expense ratio of VO is 0.08 percentage points lower than XLC’s (0.04% vs. 0.12%).

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Fund Composition

Industry Exposure

VO vs. XLC - Industry Exposure

VO XLC
Technology 22.01% 0.0%
Industrials 11.92% 0.0%
Energy 3.82% 0.0%
Communication Services 5.61% 100.0%
Utilities 5.12% 0.0%
Healthcare 13.03% 0.0%
Consumer Defensive 3.25% 0.0%
Real Estate 8.67% 0.0%
Financial Services 11.08% 0.0%
Consumer Cyclical 12.12% 0.0%
Basic Materials 3.36% 0.0%

The Vanguard Mid-Cap Index Fund ETF Shares (VO) has the most exposure to the Technology sector at 22.01%. This is followed by Healthcare and Consumer Cyclical at 13.03% and 12.12% respectively. Basic Materials (3.36%), Energy (3.82%), and Utilities (5.12%) only make up 12.30% of the fund’s total assets.

VO’s mid-section with moderate exposure is comprised of Communication Services, Real Estate, Financial Services, Industrials, and Consumer Cyclical stocks at 5.61%, 8.67%, 11.08%, 11.92%, and 12.12%.

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%.

VO is 22.01% more exposed to the Technology sector than XLC (22.01% vs 0.0%). VO’s exposure to Healthcare and Consumer Cyclical stocks is 13.03% higher and 12.12% higher respectively (13.03% vs. 0.0% and 12.12% vs. 0.0%). In total, Basic Materials, Energy, and Utilities also make up 12.30% more of the fund’s holdings compared to XLC (12.30% vs. 0.00%).

Holdings

VO - Holdings

VO Holdings Weight
IDEXX Laboratories Inc 0.78%
DocuSign Inc 0.75%
Marvell Technology Inc 0.68%
IQVIA Holdings Inc 0.68%
Chipotle Mexican Grill Inc 0.63%
Veeva Systems Inc Class A 0.62%
Digital Realty Trust Inc 0.62%
Centene Corp 0.62%
Aptiv PLC 0.62%
Carrier Global Corp Ordinary Shares 0.61%

VO’s Top Holdings are IDEXX Laboratories Inc, DocuSign Inc, Marvell Technology Inc, IQVIA Holdings Inc, and Chipotle Mexican Grill Inc at 0.78%, 0.75%, 0.68%, 0.68%, and 0.63%.

Veeva Systems Inc Class A (0.62%), Digital Realty Trust Inc (0.62%), and Centene Corp (0.62%) have a slightly smaller but still significant weight. Aptiv PLC and Carrier Global Corp Ordinary Shares are also represented in the VO’s holdings at 0.62% and 0.61%.

XLC - Holdings

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%.

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Risk Analysis

VO XLC
Mean Return 1.14 0
R-squared 92.22 0
Std. Deviation 15.65 0
Alpha -2.71 0
Beta 1.11 0
Sharpe Ratio 0.83 0
Treynor Ratio 11.32 0

The Vanguard Mid-Cap Index Fund ETF Shares (VO) has a Alpha of -2.71 with a Sharpe Ratio of 0.83 and a Beta of 1.11. Its Mean Return is 1.14 while VO’s Standard Deviation is 15.65. Furthermore, the fund has a Treynor Ratio of 11.32 and a R-squared of 92.22.

The Communication Services Select Sector SPDR Fund (XLC) has a Sharpe Ratio of 0 with a Mean Return of 0 and a Alpha of 0. Its Beta is 0 while XLC’s R-squared is 0. Furthermore, the fund has a Treynor Ratio of 0 and a Standard Deviation of 0.

VO’s Mean Return is 1.14 points higher than that of XLC and its R-squared is 92.22 points higher. With a Standard Deviation of 15.65, VO is slightly more volatile than XLC. The Alpha and Beta of VO are 2.71 points lower and 1.11 points higher than XLC’s Alpha and Beta.

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Performance

Annual Returns

VO vs. XLC - Annual Returns

Year VO XLC
2020 18.22% 26.85%
2019 31.04% 31.22%
2018 -9.21% 0.0%
2017 19.25% 0.0%
2016 11.23% 0.0%
2015 -1.34% 0.0%
2014 13.76% 0.0%
2013 35.15% 0.0%
2012 15.98% 0.0%
2011 -1.96% 0.0%
2010 25.57% 0.0%

VO had its best year in 2013 with an annual return of 35.15%. VO’s worst year over the past decade yielded -9.21% and occurred in 2018. In most years the Vanguard Mid-Cap Index Fund ETF Shares provided moderate returns such as in 2014, 2012, and 2020 where annual returns amounted to 13.76%, 15.98%, and 18.22% 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

VO vs. XLC - Portfolio Growth

Fund Initial Balance Final Balance CAGR
VO $10,000 $15,491 14.34%
XLC $10,000 $16,645 29.04%

A $10,000 investment in VO would have resulted in a final balance of $15,491. This is a profit of $5,491 over 2 years and amounts to a compound annual growth rate (CAGR) of 14.34%.

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%.

VO’s CAGR is 14.70 percentage points lower than that of XLC and as a result, would have yielded $1,154 less on a $10,000 investment. Thus, VO performed worse than XLC by 14.70% annually.


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