VOO vs. XLF: What’s The Difference?

The Vanguard S&P 500 ETF (VOO) and the Financial Select Sector SPDR Fund (XLF) are both among the Top 100 ETFs. VOO is a Vanguard Large Blend fund and XLF is a SPDR State Street Global Advisors Financial fund. So, what’s the difference between VOO and XLF? And which fund is better?

The expense ratio of VOO is 0.09 percentage points lower than XLF’s (0.03% vs. 0.12%). VOO also has a higher exposure to the technology sector and a lower standard deviation. Overall, VOO has provided higher returns than XLF over the past ten years.

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

Summary

VOO XLF
Name Vanguard S&P 500 ETF Financial Select Sector SPDR Fund
Category Large Blend Financial
Issuer Vanguard SPDR State Street Global Advisors
AUM 753.41B 40.81B
Avg. Return 14.45% 12.17%
Div. Yield 1.34% 1.57%
Expense Ratio 0.03% 0.12%

The Vanguard S&P 500 ETF (VOO) is a Large Blend fund that is issued by Vanguard. It currently has 753.41B total assets under management and has yielded an average annual return of 14.45% over the past 10 years. The fund has a dividend yield of 1.34% with an expense ratio of 0.03%.

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%.

VOO’s dividend yield is 0.23% lower than that of XLF (1.34% vs. 1.57%). Also, VOO yielded on average 2.28% more per year over the past decade (14.45% vs. 12.17%). The expense ratio of VOO is 0.09 percentage points lower than XLF’s (0.03% vs. 0.12%).

Fund Composition

Industry Exposure

VOO vs. XLF - Industry Exposure

VOO XLF
Technology 24.24% 0.0%
Industrials 8.86% 0.0%
Energy 2.84% 0.0%
Communication Services 11.14% 0.0%
Utilities 2.43% 0.0%
Healthcare 13.1% 0.0%
Consumer Defensive 6.32% 0.0%
Real Estate 2.58% 0.0%
Financial Services 14.2% 100.0%
Consumer Cyclical 12.01% 0.0%
Basic Materials 2.27% 0.0%

The Vanguard S&P 500 ETF (VOO) has the most exposure to the Technology sector at 24.24%. This is followed by Financial Services and Healthcare at 14.2% and 13.1% respectively. Utilities (2.43%), Real Estate (2.58%), and Energy (2.84%) only make up 7.85% of the fund’s total assets.

VOO’s mid-section with moderate exposure is comprised of Consumer Defensive, Industrials, Communication Services, Consumer Cyclical, and Healthcare stocks at 6.32%, 8.86%, 11.14%, 12.01%, and 13.1%.

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%.

VOO is 24.24% more exposed to the Technology sector than XLF (24.24% vs 0.0%). VOO’s exposure to Financial Services and Healthcare stocks is 85.80% lower and 13.10% higher respectively (14.2% vs. 100.0% and 13.1% vs. 0.0%). In total, Utilities, Real Estate, and Energy also make up 7.85% more of the fund’s holdings compared to XLF (7.85% vs. 0.00%).

Holdings

VOO - Holdings

VOO Holdings Weight
Apple Inc 5.92%
Microsoft Corp 5.62%
Amazon.com Inc 4.06%
Facebook Inc Class A 2.29%
Alphabet Inc Class A 2.02%
Alphabet Inc Class C 1.97%
Tesla Inc 1.44%
Berkshire Hathaway Inc Class B 1.44%
NVIDIA Corp 1.37%
JPMorgan Chase & Co 1.3%

VOO’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc Class A, and Alphabet Inc Class A at 5.92%, 5.62%, 4.06%, 2.29%, and 2.02%.

Alphabet Inc Class C (1.97%), Tesla Inc (1.44%), and Berkshire Hathaway Inc Class B (1.44%) have a slightly smaller but still significant weight. NVIDIA Corp and JPMorgan Chase & Co are also represented in the VOO’s holdings at 1.37% and 1.3%.

XLF - Holdings

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%.

Performance

Annual Returns

VOO vs. XLF - Annual Returns

Year VOO XLF
2020 18.35% -1.68%
2019 31.46% 31.88%
2018 -4.42% -13.09%
2017 21.78% 22.03%
2016 11.93% 22.55%
2015 1.35% -1.6%
2014 13.63% 15.02%
2013 32.33% 35.37%
2012 15.98% 28.53%
2011 2.09% -17.16%
2010 0.0% 11.97%

VOO had its best year in 2013 with an annual return of 32.33%. VOO’s worst year over the past decade yielded -4.42% and occurred in 2018. In most years the Vanguard S&P 500 ETF provided moderate returns such as in 2016, 2014, and 2012 where annual returns amounted to 11.93%, 13.63%, and 15.98% 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

VOO vs. XLF - Portfolio Growth

Fund Initial Balance Final Balance CAGR
VOO $10,000 $36,575 14.45%
XLF $10,000 $27,491 12.17%

A $10,000 investment in VOO would have resulted in a final balance of $36,575. This is a profit of $26,575 over 10 years and amounts to a compound annual growth rate (CAGR) of 14.45%.

With a $10,000 investment in XLF, the end total would have been $27,491. This equates to a $17,491 profit over 10 years and a compound annual growth rate (CAGR) of 12.17%.

VOO’s CAGR is 2.28 percentage points higher than that of XLF and as a result, would have yielded $9,084 more on a $10,000 investment. Thus, VOO outperformed XLF by 2.28% annually.


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