The Vanguard Mid-Cap Index Fund ETF Shares (VO) and the Health Care Select Sector SPDR Fund (XLV) are both among the Top 100 ETFs. VO is a Vanguard Mid-Cap Blend fund and XLV is a SPDR State Street Global Advisors Health fund. So, what’s the difference between VO and XLV? And which fund is better?
The expense ratio of VO is 0.08 percentage points lower than XLV’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 XLV over the past ten years.
In this article, we’ll compare VO vs. XLV. We’ll look at portfolio growth and industry exposure, as well as at their annual returns and performance. Moreover, I’ll also discuss VO’s and XLV’s risk metrics, fund composition, and holdings and examine how these affect their overall returns.
Summary
| VO | XLV | |
| Name | Vanguard Mid-Cap Index Fund ETF Shares | Health Care Select Sector SPDR Fund |
| Category | Mid-Cap Blend | Health |
| Issuer | Vanguard | SPDR State Street Global Advisors |
| AUM | 154.08B | 27.88B |
| Avg. Return | 14.34% | 15.02% |
| Div. Yield | 1.23% | 1.4% |
| 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 Health Care Select Sector SPDR Fund (XLV) is a Health fund that is issued by SPDR State Street Global Advisors. It currently has 27.88B total assets under management and has yielded an average annual return of 15.02% over the past 10 years. The fund has a dividend yield of 1.4% with an expense ratio of 0.12%.
VO’s dividend yield is 0.17% lower than that of XLV (1.23% vs. 1.4%). Also, VO yielded on average 0.69% less per year over the past decade (14.34% vs. 15.02%). The expense ratio of VO is 0.08 percentage points lower than XLV’s (0.04% vs. 0.12%).
Fund Composition
Industry Exposure
| VO | XLV | |
| 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% | 100.0% |
| 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 Health Care Select Sector SPDR Fund (XLV) has the most exposure to the Healthcare 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.
XLV’s mid-section with moderate exposure is comprised of Consumer Defensive, 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 XLV (22.01% vs 0.0%). VO’s exposure to Healthcare and Consumer Cyclical stocks is 86.97% lower and 12.12% higher respectively (13.03% vs. 100.0% 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 XLV (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%.
| XLV Holdings | Weight |
| Johnson & Johnson | 9.19% |
| UnitedHealth Group Inc | 8.01% |
| Pfizer Inc | 4.64% |
| Abbott Laboratories | 4.36% |
| AbbVie Inc | 4.21% |
| Thermo Fisher Scientific Inc | 4.2% |
| Merck & Co Inc | 4.17% |
| Eli Lilly and Co | 3.87% |
| Danaher Corp | 3.61% |
| Medtronic PLC | 3.54% |
XLV’s Top Holdings are Johnson & Johnson, UnitedHealth Group Inc, Pfizer Inc, Abbott Laboratories, and AbbVie Inc at 9.19%, 8.01%, 4.64%, 4.36%, and 4.21%.
Thermo Fisher Scientific Inc (4.2%), Merck & Co Inc (4.17%), and Eli Lilly and Co (3.87%) have a slightly smaller but still significant weight. Danaher Corp and Medtronic PLC are also represented in the XLV’s holdings at 3.61% and 3.54%.
Risk Analysis
| VO | XLV | |
| Mean Return | 1.14 | 1.27 |
| R-squared | 92.22 | 58.19 |
| Std. Deviation | 15.65 | 12.94 |
| Alpha | -2.71 | 7.75 |
| Beta | 1.11 | 0.7 |
| Sharpe Ratio | 0.83 | 1.13 |
| Treynor Ratio | 11.32 | 21.1 |
The Vanguard Mid-Cap Index Fund ETF Shares (VO) has a R-squared of 92.22 with a Mean Return of 1.14 and a Standard Deviation of 15.65. Its Alpha is -2.71 while VO’s Treynor Ratio is 11.32. Furthermore, the fund has a Beta of 1.11 and a Sharpe Ratio of 0.83.
The Health Care Select Sector SPDR Fund (XLV) has a Beta of 0.7 with a Standard Deviation of 12.94 and a Sharpe Ratio of 1.13. Its Alpha is 7.75 while XLV’s Mean Return is 1.27. Furthermore, the fund has a Treynor Ratio of 21.1 and a R-squared of 58.19.
VO’s Mean Return is 0.13 points lower than that of XLV and its R-squared is 34.03 points higher. With a Standard Deviation of 15.65, VO is slightly more volatile than XLV. The Alpha and Beta of VO are 10.46 points lower and 0.41 points higher than XLV’s Alpha and Beta.
Performance
Annual Returns
| Year | VO | XLV |
| 2020 | 18.22% | 13.33% |
| 2019 | 31.04% | 20.63% |
| 2018 | -9.21% | 6.3% |
| 2017 | 19.25% | 21.7% |
| 2016 | 11.23% | -2.83% |
| 2015 | -1.34% | 6.82% |
| 2014 | 13.76% | 25.17% |
| 2013 | 35.15% | 41.24% |
| 2012 | 15.98% | 17.56% |
| 2011 | -1.96% | 12.44% |
| 2010 | 25.57% | 2.91% |
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 XLV, returning 41.24% on an annual basis. The poorest year for XLV in the last ten years was 2016, with a yield of -2.83%. Most years the Health Care Select Sector SPDR Fund has given investors modest returns, such as in 2011, 2020, and 2012, when gains were 12.44%, 13.33%, and 17.56% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| VO | $10,000 | $40,404 | 14.34% |
| XLV | $10,000 | $44,147 | 15.02% |
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 XLV, the end total would have been $44,147. This equates to a $34,147 profit over 11 years and a compound annual growth rate (CAGR) of 15.02%.
VO’s CAGR is 0.69 percentage points lower than that of XLV and as a result, would have yielded $3,743 less on a $10,000 investment. Thus, VO performed worse than XLV by 0.69% annually.
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