The Vanguard Mid-Cap Index Fund ETF Shares (VO) and the Financial Select Sector SPDR Fund (XLF) are both among the Top 100 ETFs. VO is a Vanguard Mid-Cap Blend fund and XLF is a SPDR State Street Global Advisors Financial fund. So, what’s the difference between VO and XLF? And which fund is better?
The expense ratio of VO is 0.08 percentage points lower than XLF’s (0.04% vs. 0.12%). VO also has a higher exposure to the technology sector and a lower standard deviation. Overall, VO has provided higher returns than XLF over the past ten years.
In this article, we’ll compare VO vs. XLF. We’ll look at risk metrics and portfolio growth, as well as at their holdings and fund composition. Moreover, I’ll also discuss VO’s and XLF’s performance, industry exposure, and annual returns and examine how these affect their overall returns.
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Summary
| VO | XLF | |
| Name | Vanguard Mid-Cap Index Fund ETF Shares | Financial Select Sector SPDR Fund |
| Category | Mid-Cap Blend | Financial |
| Issuer | Vanguard | SPDR State Street Global Advisors |
| AUM | 154.08B | 40.81B |
| Avg. Return | 14.34% | 12.17% |
| Div. Yield | 1.23% | 1.57% |
| 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 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%.
VO’s dividend yield is 0.34% lower than that of XLF (1.23% vs. 1.57%). Also, VO yielded on average 2.17% more per year over the past decade (14.34% vs. 12.17%). The expense ratio of VO is 0.08 percentage points lower than XLF’s (0.04% vs. 0.12%).
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Fund Composition
Industry Exposure
| VO | XLF | |
| Technology | 22.01% | 0.0% |
| Industrials | 11.92% | 0.0% |
| Energy | 3.82% | 0.0% |
| Communication Services | 5.61% | 0.0% |
| 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% | 100.0% |
| 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 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%.
VO is 22.01% more exposed to the Technology sector than XLF (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 XLF (12.30% vs. 0.00%).
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%.
| XLF Holdings | Weight |
| Berkshire Hathaway Inc Class B | 12.83% |
| JPMorgan Chase & Co | 11.47% |
| Bank of America Corp | 7.57% |
| Wells Fargo & Co | 4.56% |
| Citigroup Inc | 3.56% |
| Morgan Stanley | 3.32% |
| Goldman Sachs Group Inc | 3.15% |
| BlackRock Inc | 3.02% |
| 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%.
Risk Analysis
| VO | XLF | |
| Mean Return | 1.14 | 1.21 |
| R-squared | 92.22 | 73.26 |
| Std. Deviation | 15.65 | 18.86 |
| Alpha | -2.71 | 2.63 |
| Beta | 1.11 | 1.15 |
| Sharpe Ratio | 0.83 | 0.74 |
| Treynor Ratio | 11.32 | 11.25 |
The Vanguard Mid-Cap Index Fund ETF Shares (VO) has a R-squared of 92.22 with a Beta of 1.11 and a Mean Return of 1.14. Its Treynor Ratio is 11.32 while VO’s Standard Deviation is 15.65. Furthermore, the fund has a Alpha of -2.71 and a Sharpe Ratio of 0.83.
The Financial Select Sector SPDR Fund (XLF) has a Sharpe Ratio of 0.74 with a Treynor Ratio of 11.25 and a Mean Return of 1.21. Its R-squared is 73.26 while XLF’s Alpha is 2.63. Furthermore, the fund has a Beta of 1.15 and a Standard Deviation of 18.86.
VO’s Mean Return is 0.07 points lower than that of XLF and its R-squared is 18.96 points higher. With a Standard Deviation of 15.65, VO is slightly less volatile than XLF. The Alpha and Beta of VO are 5.34 points lower and 0.04 points lower than XLF’s Alpha and Beta.
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Performance
Annual Returns
| Year | VO | XLF |
| 2020 | 18.22% | -1.68% |
| 2019 | 31.04% | 31.88% |
| 2018 | -9.21% | -13.09% |
| 2017 | 19.25% | 22.03% |
| 2016 | 11.23% | 22.55% |
| 2015 | -1.34% | -1.6% |
| 2014 | 13.76% | 15.02% |
| 2013 | 35.15% | 35.37% |
| 2012 | 15.98% | 28.53% |
| 2011 | -1.96% | -17.16% |
| 2010 | 25.57% | 11.97% |
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 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.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| VO | $10,000 | $40,404 | 14.34% |
| XLF | $10,000 | $30,782 | 12.17% |
A $10,000 investment in VO would have resulted in a final balance of $40,404. This is a profit of $30,404 over 11 years and amounts to a compound annual growth rate (CAGR) of 14.34%.
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%.
VO’s CAGR is 2.17 percentage points higher than that of XLF and as a result, would have yielded $9,622 more on a $10,000 investment. Thus, VO outperformed XLF by 2.17% annually.
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