VTV vs. XLI: What’s The Difference?

The Vanguard Value Index Fund ETF Shares (VTV) and the Industrial Select Sector SPDR Fund (XLI) are both among the Top 100 ETFs. VTV is a Vanguard Large Value fund and XLI is a SPDR State Street Global Advisors Industrials fund. So, what’s the difference between VTV and XLI? And which fund is better?

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

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

Summary

VTV XLI
Name Vanguard Value Index Fund ETF Shares Industrial Select Sector SPDR Fund
Category Large Value Industrials
Issuer Vanguard SPDR State Street Global Advisors
AUM 125.77B 19.33B
Avg. Return 12.07% 14.44%
Div. Yield 2.15% 1.25%
Expense Ratio 0.04% 0.12%

The Vanguard Value Index Fund ETF Shares (VTV) is a Large Value fund that is issued by Vanguard. It currently has 125.77B total assets under management and has yielded an average annual return of 12.07% over the past 10 years. The fund has a dividend yield of 2.15% with an expense ratio of 0.04%.

The Industrial Select Sector SPDR Fund (XLI) is a Industrials fund that is issued by SPDR State Street Global Advisors. It currently has 19.33B total assets under management and has yielded an average annual return of 14.44% over the past 10 years. The fund has a dividend yield of 1.25% with an expense ratio of 0.12%.

VTV’s dividend yield is 0.90% higher than that of XLI (2.15% vs. 1.25%). Also, VTV yielded on average 2.37% less per year over the past decade (12.07% vs. 14.44%). The expense ratio of VTV is 0.08 percentage points lower than XLI’s (0.04% vs. 0.12%).

FYI: The best way I've found to invest in ETFs is through M1 Finance. It's free and you even get an instant line of credit! Have a look here (link to M1 Finance).

Fund Composition

Industry Exposure

VTV vs. XLI - Industry Exposure

VTV XLI
Technology 7.86% 1.82%
Industrials 12.61% 97.49%
Energy 5.59% 0.0%
Communication Services 5.49% 0.0%
Utilities 5.37% 0.0%
Healthcare 19.84% 0.0%
Consumer Defensive 10.72% 0.0%
Real Estate 3.01% 0.0%
Financial Services 22.81% 0.0%
Consumer Cyclical 3.79% 0.69%
Basic Materials 2.91% 0.0%

The Vanguard Value Index Fund ETF Shares (VTV) has the most exposure to the Financial Services sector at 22.81%. This is followed by Healthcare and Industrials at 19.84% and 12.61% respectively. Real Estate (3.01%), Consumer Cyclical (3.79%), and Utilities (5.37%) only make up 12.17% of the fund’s total assets.

VTV’s mid-section with moderate exposure is comprised of Communication Services, Energy, Technology, Consumer Defensive, and Industrials stocks at 5.49%, 5.59%, 7.86%, 10.72%, and 12.61%.

The Industrial Select Sector SPDR Fund (XLI) has the most exposure to the Industrials sector at 97.49%. This is followed by Technology and Consumer Cyclical at 1.82% and 0.69% respectively. Financial Services (0.0%), Real Estate (0.0%), and Consumer Defensive (0.0%) only make up 0.00% of the fund’s total assets.

XLI’s mid-section with moderate exposure is comprised of Healthcare, Utilities, Communication Services, Energy, and Consumer Cyclical stocks at 0.0%, 0.0%, 0.0%, 0.0%, and 0.69%.

VTV is 22.81% more exposed to the Financial Services sector than XLI (22.81% vs 0.0%). VTV’s exposure to Healthcare and Industrials stocks is 19.84% higher and 84.88% lower respectively (19.84% vs. 0.0% and 12.61% vs. 97.49%). In total, Real Estate, Consumer Cyclical, and Utilities also make up 11.48% more of the fund’s holdings compared to XLI (12.17% vs. 0.69%).

Holdings

VTV - Holdings

VTV Holdings Weight
Berkshire Hathaway Inc Class B 2.98%
JPMorgan Chase & Co 2.82%
Johnson & Johnson 2.6%
UnitedHealth Group Inc 2.27%
Procter & Gamble Co 1.98%
Bank of America Corp 1.91%
Exxon Mobil Corp 1.6%
Comcast Corp Class A 1.57%
Intel Corp 1.36%
Verizon Communications Inc 1.32%

VTV’s Top Holdings are Berkshire Hathaway Inc Class B, JPMorgan Chase & Co, Johnson & Johnson, UnitedHealth Group Inc, and Procter & Gamble Co at 2.98%, 2.82%, 2.6%, 2.27%, and 1.98%.

Bank of America Corp (1.91%), Exxon Mobil Corp (1.6%), and Comcast Corp Class A (1.57%) have a slightly smaller but still significant weight. Intel Corp and Verizon Communications Inc are also represented in the VTV’s holdings at 1.36% and 1.32%.

XLI - Holdings

XLI Holdings Weight
Honeywell International Inc 4.9%
United Parcel Service Inc Class B 4.84%
Union Pacific Corp 4.7%
Boeing Co 4.24%
Raytheon Technologies Corp 4.16%
Caterpillar Inc 3.84%
General Electric Co 3.8%
3M Co 3.7%
Deere & Co 3.54%
Lockheed Martin Corp 2.98%

XLI’s Top Holdings are Honeywell International Inc, United Parcel Service Inc Class B, Union Pacific Corp, Boeing Co, and Raytheon Technologies Corp at 4.9%, 4.84%, 4.7%, 4.24%, and 4.16%.

Caterpillar Inc (3.84%), General Electric Co (3.8%), and 3M Co (3.7%) have a slightly smaller but still significant weight. Deere & Co and Lockheed Martin Corp are also represented in the XLI’s holdings at 3.54% and 2.98%.

NOTE: The easiest way to add diversification to your portfolio is to invest in real estate through Fundrise. You can become private real estate investor without the burden of property management! Check it out here (link to Fundrise).

Risk Analysis

VTV XLI
Mean Return 1.05 1.14
R-squared 92.61 78.97
Std. Deviation 13.78 17.13
Alpha -1.92 2.38
Beta 0.98 1.08
Sharpe Ratio 0.87 0.76
Treynor Ratio 11.94 11.34

The Vanguard Value Index Fund ETF Shares (VTV) has a Mean Return of 1.05 with a Standard Deviation of 13.78 and a Sharpe Ratio of 0.87. Its R-squared is 92.61 while VTV’s Beta is 0.98. Furthermore, the fund has a Alpha of -1.92 and a Treynor Ratio of 11.94.

The Industrial Select Sector SPDR Fund (XLI) has a Alpha of 2.38 with a Mean Return of 1.14 and a R-squared of 78.97. Its Standard Deviation is 17.13 while XLI’s Sharpe Ratio is 0.76. Furthermore, the fund has a Treynor Ratio of 11.34 and a Beta of 1.08.

VTV’s Mean Return is 0.09 points lower than that of XLI and its R-squared is 13.64 points higher. With a Standard Deviation of 13.78, VTV is slightly less volatile than XLI. The Alpha and Beta of VTV are 4.30 points lower and 0.10 points lower than XLI’s Alpha and Beta.

BTW: Uncorrelated crypto assets such as Bitcoin can serve as a hedge and mitigate risk. I've allocated around 5% of my portfolio to crypto assets through Gemini - the simplest and cheapest broker I've found! Click here to read more (link to Gemini).

Performance

Annual Returns

VTV vs. XLI - Annual Returns

Year VTV XLI
2020 2.23% 11.0%
2019 25.85% 29.11%
2018 -5.39% -13.1%
2017 17.12% 23.85%
2016 16.88% 19.93%
2015 -0.89% -4.27%
2014 13.19% 10.44%
2013 33.03% 40.44%
2012 15.19% 14.86%
2011 1.16% -1.01%
2010 14.45% 27.62%

VTV had its best year in 2013 with an annual return of 33.03%. VTV’s worst year over the past decade yielded -5.39% and occurred in 2018. In most years the Vanguard Value Index Fund ETF Shares provided moderate returns such as in 2014, 2010, and 2012 where annual returns amounted to 13.19%, 14.45%, and 15.19% respectively.

The year 2013 was the strongest year for XLI, returning 40.44% on an annual basis. The poorest year for XLI in the last ten years was 2018, with a yield of -13.1%. Most years the Industrial Select Sector SPDR Fund has given investors modest returns, such as in 2020, 2012, and 2016, when gains were 11.0%, 14.86%, and 19.93% respectively.

Portfolio Growth

VTV vs. XLI - Portfolio Growth

Fund Initial Balance Final Balance CAGR
VTV $10,000 $33,163 12.07%
XLI $10,000 $39,853 14.44%

A $10,000 investment in VTV would have resulted in a final balance of $33,163. This is a profit of $23,163 over 11 years and amounts to a compound annual growth rate (CAGR) of 12.07%.

With a $10,000 investment in XLI, the end total would have been $39,853. This equates to a $29,853 profit over 11 years and a compound annual growth rate (CAGR) of 14.44%.

VTV’s CAGR is 2.37 percentage points lower than that of XLI and as a result, would have yielded $6,690 less on a $10,000 investment. Thus, VTV performed worse than XLI by 2.37% annually.


Current recommendations:

Over the past years, I have discovered several tools and products that have helped me tremendously on my path to financial freedom:

P.S.: The links below are affiliate links, which means I receive a small commission at no extra cost to you when you sign up for one of the services. Thank you for your support!

1) Take a look at M1 Finance, my favorite broker. I love how easy it is to invest and maintain my portfolio with them. I can set up automatic transfers, rebalance my portfolio with one click and even borrow up to 35% of my assets at super low interest rates!

2) Fundrise is by far the best way I've found to invest in Real Estate. You can diversify your portfolio by investing in their eREITs or even allocate capital to individual properties (without the hassle of managing tenants!).

3) If you are interested in crypto, check out Gemini. I've started allocating a small amount of assets to the growing crypto space and Gemini has just been a breeze to use. Once you register, make sure to also open an Active Trader account to buy crypto at the lowest fees on the market (just 0.03%!).

To see all of my most up-to-date recommendations, check out the Recommended Tools section.

Leave a Reply