VTIP vs. XLC: What’s The Difference?

The Vanguard Short-Term Inflation-Protected Securities Index Fund ETF Shares (VTIP) and the Communication Services Select Sector SPDR Fund (XLC) are both among the Top 100 ETFs. VTIP is a Vanguard Inflation-Protected Bond fund and XLC is a SPDR State Street Global Advisors Communications fund. So, what’s the difference between VTIP and XLC? And which fund is better?

The expense ratio of VTIP is 0.07 percentage points lower than XLC’s (0.05% vs. 0.12%). VTIP is mostly comprised of AAA bonds while XLC has a high exposure to the communication services sector. Overall, VTIP has provided lower returns than XLC over the past 2 years.

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

Summary

VTIP XLC
Name Vanguard Short-Term Inflation-Protected Securities Index Fund ETF Shares Communication Services Select Sector SPDR Fund
Category Inflation-Protected Bond Communications
Issuer Vanguard SPDR State Street Global Advisors
AUM 50.67B 14.09B
Avg. Return 1.79% 29.04%
Div. Yield 1.35% 0.62%
Expense Ratio 0.05% 0.12%

The Vanguard Short-Term Inflation-Protected Securities Index Fund ETF Shares (VTIP) is a Inflation-Protected Bond fund that is issued by Vanguard. It currently has 50.67B total assets under management and has yielded an average annual return of 1.79% over the past 10 years. The fund has a dividend yield of 1.35% with an expense ratio of 0.05%.

The Communication Services Select Sector SPDR Fund (XLC) is a Communications fund that is issued by SPDR State Street Global Advisors. It currently has 14.09B total assets under management and has yielded an average annual return of 29.04% over the past 10 years. The fund has a dividend yield of 0.62% with an expense ratio of 0.12%.

VTIP’s dividend yield is 0.73% higher than that of XLC (1.35% vs. 0.62%). Also, VTIP yielded on average 27.24% less per year over the past decade (1.79% vs. 29.04%). The expense ratio of VTIP is 0.07 percentage points lower than XLC’s (0.05% vs. 0.12%).

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Fund Composition

Holdings

VTIP - Holdings

VTIP Bond Sectors Weight
AAA 99.87%
Others 0.13%
Below B 0.0%
B 0.0%
BB 0.0%
BBB 0.0%
A 0.0%
AA 0.0%
US Government 0.0%

VTIP’s Top Bond Sectors are ratings of AAA, Others, Below B, B, and BB at 99.87%, 0.13%, 0.0%, 0.0%, and 0.0%. The fund is less weighted towards BBB (0.0%), A (0.0%), and AA (0.0%) rated bonds.

XLC - Holdings

XLC Holdings Weight
Facebook Inc A 23.75%
Alphabet Inc A 11.49%
Alphabet Inc Class C 11.16%
Netflix Inc 4.78%
Charter Communications Inc A 4.65%
Comcast Corp Class A 4.44%
T-Mobile US Inc 4.41%
The Walt Disney Co 4.39%
AT&T Inc 4.35%
Verizon Communications Inc 4.33%

XLC’s Top Holdings are Facebook Inc A, Alphabet Inc A, Alphabet Inc Class C, Netflix Inc, and Charter Communications Inc A at 23.75%, 11.49%, 11.16%, 4.78%, and 4.65%.

Comcast Corp Class A (4.44%), T-Mobile US Inc (4.41%), and The Walt Disney Co (4.39%) have a slightly smaller but still significant weight. AT&T Inc and Verizon Communications Inc are also represented in the XLC’s holdings at 4.35% and 4.33%.

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Risk Analysis

VTIP XLC
Mean Return 0 0
R-squared 0 0
Std. Deviation 0 0
Alpha 0 0
Beta 0 0
Sharpe Ratio 0 0
Treynor Ratio 0 0

The Vanguard Short-Term Inflation-Protected Securities Index Fund ETF Shares (VTIP) has a Mean Return of 0 with a Sharpe Ratio of 0 and a Alpha of 0. Its Standard Deviation is 0 while VTIP’s Treynor Ratio is 0. Furthermore, the fund has a Beta of 0 and a R-squared of 0.

The Communication Services Select Sector SPDR Fund (XLC) has a Mean Return of 0 with a Sharpe Ratio of 0 and a Treynor Ratio of 0. Its Standard Deviation is 0 while XLC’s Beta is 0. Furthermore, the fund has a Alpha of 0 and a R-squared of 0.

VTIP’s Mean Return is 0.00 points lower than that of XLC and its R-squared is 0.00 points lower. With a Standard Deviation of 0, VTIP is slightly less volatile than XLC. The Alpha and Beta of VTIP are 0.00 points lower and 0.00 points lower than XLC’s Alpha and Beta.

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Performance

Annual Returns

VTIP vs. XLC - Annual Returns

Year VTIP XLC
2020 4.97% 26.85%
2019 4.83% 31.22%
2018 0.54% 0.0%
2017 0.82% 0.0%
2016 2.71% 0.0%
2015 -0.15% 0.0%
2014 -1.17% 0.0%
2013 -1.55% 0.0%
2012 0.0% 0.0%
2011 0.0% 0.0%
2010 0.0% 0.0%

VTIP had its best year in 2020 with an annual return of 4.97%. VTIP’s worst year over the past decade yielded -1.55% and occurred in 2013. In most years the Vanguard Short-Term Inflation-Protected Securities Index Fund ETF Shares provided moderate returns such as in 2011, 2010, and 2018 where annual returns amounted to 0.0%, 0.0%, and 0.54% respectively.

The year 2019 was the strongest year for XLC, returning 31.22% on an annual basis. The poorest year for XLC in the last ten years was 2018, with a yield of 0.0%. Most years the Communication Services Select Sector SPDR Fund has given investors modest returns, such as in 2014, 2013, and 2012, when gains were 0.0%, 0.0%, and 0.0% respectively.

Portfolio Growth

VTIP vs. XLC - Portfolio Growth

Fund Initial Balance Final Balance CAGR
VTIP $10,000 $11,004 1.79%
XLC $10,000 $16,645 29.04%

A $10,000 investment in VTIP would have resulted in a final balance of $11,004. This is a profit of $1,004 over 2 years and amounts to a compound annual growth rate (CAGR) of 1.79%.

With a $10,000 investment in XLC, the end total would have been $16,645. This equates to a $6,645 profit over 2 years and a compound annual growth rate (CAGR) of 29.04%.

VTIP’s CAGR is 27.24 percentage points lower than that of XLC and as a result, would have yielded $5,641 less on a $10,000 investment. Thus, VTIP performed worse than XLC by 27.24% annually.


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