VTV vs. XLK: What’s The Difference?

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

The expense ratio of VTV is 0.08 percentage points lower than XLK’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 XLK over the past ten years.

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

Summary

VTV XLK
Name Vanguard Value Index Fund ETF Shares Technology Select Sector SPDR Fund
Category Large Value Technology
Issuer Vanguard SPDR State Street Global Advisors
AUM 125.77B 42.3B
Avg. Return 12.07% 20.02%
Div. Yield 2.15% 0.73%
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 Technology Select Sector SPDR Fund (XLK) is a Technology fund that is issued by SPDR State Street Global Advisors. It currently has 42.3B total assets under management and has yielded an average annual return of 20.02% over the past 10 years. The fund has a dividend yield of 0.73% with an expense ratio of 0.12%.

VTV’s dividend yield is 1.42% higher than that of XLK (2.15% vs. 0.73%). Also, VTV yielded on average 7.95% less per year over the past decade (12.07% vs. 20.02%). The expense ratio of VTV is 0.08 percentage points lower than XLK’s (0.04% vs. 0.12%).

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Fund Composition

Industry Exposure

VTV vs. XLK - Industry Exposure

VTV XLK
Technology 7.86% 87.54%
Industrials 12.61% 1.75%
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% 10.71%
Consumer Cyclical 3.79% 0.0%
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 Technology Select Sector SPDR Fund (XLK) has the most exposure to the Technology sector at 87.54%. This is followed by Financial Services and Industrials at 10.71% and 1.75% 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.

XLK’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 1.75%.

VTV is 12.10% more exposed to the Financial Services sector than XLK (22.81% vs 10.71%). VTV’s exposure to Healthcare and Industrials stocks is 19.84% higher and 10.86% higher respectively (19.84% vs. 0.0% and 12.61% vs. 1.75%). In total, Real Estate, Consumer Cyclical, and Utilities also make up 12.17% more of the fund’s holdings compared to XLK (12.17% vs. 0.00%).

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%.

XLK - Holdings

XLK Holdings Weight
Apple Inc 21.45%
Microsoft Corp 20.37%
NVIDIA Corp 4.98%
Visa Inc Class A 3.95%
PayPal Holdings Inc 3.42%
Mastercard Inc A 3.19%
Adobe Inc 2.8%
Salesforce.com Inc 2.26%
Intel Corp 2.26%
Cisco Systems Inc 2.23%

XLK’s Top Holdings are Apple Inc, Microsoft Corp, NVIDIA Corp, Visa Inc Class A, and PayPal Holdings Inc at 21.45%, 20.37%, 4.98%, 3.95%, and 3.42%.

Mastercard Inc A (3.19%), Adobe Inc (2.8%), and Salesforce.com Inc (2.26%) have a slightly smaller but still significant weight. Intel Corp and Cisco Systems Inc are also represented in the XLK’s holdings at 2.26% and 2.23%.

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Risk Analysis

VTV XLK
Mean Return 1.05 1.7
R-squared 92.61 73.56
Std. Deviation 13.78 15.58
Alpha -1.92 10.43
Beta 0.98 0.95
Sharpe Ratio 0.87 1.27
Treynor Ratio 11.94 21.44

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

The Technology Select Sector SPDR Fund (XLK) has a Treynor Ratio of 21.44 with a R-squared of 73.56 and a Sharpe Ratio of 1.27. Its Standard Deviation is 15.58 while XLK’s Beta is 0.95. Furthermore, the fund has a Alpha of 10.43 and a Mean Return of 1.7.

VTV’s Mean Return is 0.65 points lower than that of XLK and its R-squared is 19.05 points higher. With a Standard Deviation of 13.78, VTV is slightly less volatile than XLK. The Alpha and Beta of VTV are 12.35 points lower and 0.03 points higher than XLK’s Alpha and Beta.

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Performance

Annual Returns

VTV vs. XLK - Annual Returns

Year VTV XLK
2020 2.23% 43.67%
2019 25.85% 49.97%
2018 -5.39% -1.56%
2017 17.12% 34.27%
2016 16.88% 14.81%
2015 -0.89% 5.62%
2014 13.19% 17.75%
2013 33.03% 25.98%
2012 15.19% 15.47%
2011 1.16% 2.69%
2010 14.45% 11.6%

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 2019 was the strongest year for XLK, returning 49.97% on an annual basis. The poorest year for XLK in the last ten years was 2018, with a yield of -1.56%. Most years the Technology Select Sector SPDR Fund has given investors modest returns, such as in 2016, 2012, and 2014, when gains were 14.81%, 15.47%, and 17.75% respectively.

Portfolio Growth

VTV vs. XLK - Portfolio Growth

Fund Initial Balance Final Balance CAGR
VTV $10,000 $33,163 12.07%
XLK $10,000 $67,790 20.02%

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 XLK, the end total would have been $67,790. This equates to a $57,790 profit over 11 years and a compound annual growth rate (CAGR) of 20.02%.

VTV’s CAGR is 7.95 percentage points lower than that of XLK and as a result, would have yielded $34,627 less on a $10,000 investment. Thus, VTV performed worse than XLK by 7.95% annually.


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