VO vs. XLK: What’s The Difference?

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

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

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

Summary

VO XLK
Name Vanguard Mid-Cap Index Fund ETF Shares Technology Select Sector SPDR Fund
Category Mid-Cap Blend Technology
Issuer Vanguard SPDR State Street Global Advisors
AUM 154.08B 42.3B
Avg. Return 14.34% 20.02%
Div. Yield 1.23% 0.73%
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 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%.

VO’s dividend yield is 0.50% higher than that of XLK (1.23% vs. 0.73%). Also, VO yielded on average 5.69% less per year over the past decade (14.34% vs. 20.02%). The expense ratio of VO is 0.08 percentage points lower than XLK’s (0.04% vs. 0.12%).

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Fund Composition

Industry Exposure

VO vs. XLK - Industry Exposure

VO XLK
Technology 22.01% 87.54%
Industrials 11.92% 1.75%
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% 10.71%
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 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%.

VO is 65.53% less exposed to the Technology sector than XLK (22.01% vs 87.54%). 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 XLK (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%.

XLK - Holdings

XLK Holdings Weight
Apple Inc 21.45%
Microsoft Corp 20.37%
NVIDIA Corp 4.98%
Visa Inc Class A 3.95%
PayPal Holdings Inc 3.42%
Mastercard Inc A 3.19%
Adobe Inc 2.8%
Salesforce.com Inc 2.26%
Intel Corp 2.26%
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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Risk Analysis

VO XLK
Mean Return 1.14 1.7
R-squared 92.22 73.56
Std. Deviation 15.65 15.58
Alpha -2.71 10.43
Beta 1.11 0.95
Sharpe Ratio 0.83 1.27
Treynor Ratio 11.32 21.44

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

The Technology Select Sector SPDR Fund (XLK) has a Mean Return of 1.7 with a Beta of 0.95 and a Alpha of 10.43. Its Sharpe Ratio is 1.27 while XLK’s Treynor Ratio is 21.44. Furthermore, the fund has a Standard Deviation of 15.58 and a R-squared of 73.56.

VO’s Mean Return is 0.56 points lower than that of XLK and its R-squared is 18.66 points higher. With a Standard Deviation of 15.65, VO is slightly more volatile than XLK. The Alpha and Beta of VO are 13.14 points lower and 0.16 points higher than XLK’s Alpha and Beta.

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Performance

Annual Returns

VO vs. XLK - Annual Returns

Year VO XLK
2020 18.22% 43.67%
2019 31.04% 49.97%
2018 -9.21% -1.56%
2017 19.25% 34.27%
2016 11.23% 14.81%
2015 -1.34% 5.62%
2014 13.76% 17.75%
2013 35.15% 25.98%
2012 15.98% 15.47%
2011 -1.96% 2.69%
2010 25.57% 11.6%

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 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.

Portfolio Growth

VO vs. XLK - Portfolio Growth

Fund Initial Balance Final Balance CAGR
VO $10,000 $40,404 14.34%
XLK $10,000 $67,790 20.02%

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 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%.

VO’s CAGR is 5.69 percentage points lower than that of XLK and as a result, would have yielded $27,386 less on a $10,000 investment. Thus, VO performed worse than XLK by 5.69% annually.


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