VO vs. XLY: What’s The Difference?

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

The expense ratio of VO is 0.08 percentage points lower than XLY’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 lower returns than XLY over the past ten years.

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

Summary

VO XLY
Name Vanguard Mid-Cap Index Fund ETF Shares Consumer Discretionary Select Sector SPDR Fund
Category Mid-Cap Blend Consumer Cyclical
Issuer Vanguard SPDR State Street Global Advisors
AUM 154.08B 20.21B
Avg. Return 14.34% 18.86%
Div. Yield 1.23% 0.63%
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 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%.

VO’s dividend yield is 0.60% higher than that of XLY (1.23% vs. 0.63%). Also, VO yielded on average 4.53% less per year over the past decade (14.34% vs. 18.86%). The expense ratio of VO is 0.08 percentage points lower than XLY’s (0.04% vs. 0.12%).

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Fund Composition

Industry Exposure

VO vs. XLY - Industry Exposure

VO XLY
Technology 22.01% 0.57%
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% 5.34%
Real Estate 8.67% 0.0%
Financial Services 11.08% 0.0%
Consumer Cyclical 12.12% 94.1%
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 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%.

VO is 21.44% more exposed to the Technology sector than XLY (22.01% vs 0.57%). VO’s exposure to Healthcare and Consumer Cyclical stocks is 13.03% higher and 81.98% lower respectively (13.03% vs. 0.0% and 12.12% vs. 94.1%). In total, Basic Materials, Energy, and Utilities also make up 12.30% more of the fund’s holdings compared to XLY (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%.

XLY - Holdings

XLY Holdings Weight
Amazon.com Inc 22.9%
Tesla Inc 13.5%
The Home Depot Inc 8.74%
McDonald’s Corp 4.5%
Nike Inc B 4.45%
Lowe’s Companies Inc 3.58%
Starbucks Corp 3.44%
Target Corp 3.12%
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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Risk Analysis

VO XLY
Mean Return 1.14 1.47
R-squared 92.22 80.84
Std. Deviation 15.65 15.97
Alpha -2.71 6.96
Beta 1.11 1.02
Sharpe Ratio 0.83 1.06
Treynor Ratio 11.32 16.69

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 Treynor Ratio is 11.32 while VO’s Mean Return is 1.14. Furthermore, the fund has a R-squared of 92.22 and a Standard Deviation of 15.65.

The Consumer Discretionary Select Sector SPDR Fund (XLY) has a Mean Return of 1.47 with a R-squared of 80.84 and a Treynor Ratio of 16.69. Its Sharpe Ratio is 1.06 while XLY’s Standard Deviation is 15.97. Furthermore, the fund has a Beta of 1.02 and a Alpha of 6.96.

VO’s Mean Return is 0.33 points lower than that of XLY and its R-squared is 11.38 points higher. With a Standard Deviation of 15.65, VO is slightly less volatile than XLY. The Alpha and Beta of VO are 9.67 points lower and 0.09 points higher than XLY’s Alpha and Beta.

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Performance

Annual Returns

VO vs. XLY - Annual Returns

Year VO XLY
2020 18.22% 29.66%
2019 31.04% 28.43%
2018 -9.21% 1.66%
2017 19.25% 22.77%
2016 11.23% 5.87%
2015 -1.34% 9.93%
2014 13.76% 9.49%
2013 35.15% 42.74%
2012 15.98% 23.6%
2011 -1.96% 5.98%
2010 25.57% 27.36%

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 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.

Portfolio Growth

VO vs. XLY - Portfolio Growth

Fund Initial Balance Final Balance CAGR
VO $10,000 $40,404 14.34%
XLY $10,000 $63,066 18.86%

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 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%.

VO’s CAGR is 4.53 percentage points lower than that of XLY and as a result, would have yielded $22,662 less on a $10,000 investment. Thus, VO performed worse than XLY by 4.53% annually.


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