The Vanguard Growth Index Fund ETF Shares (VUG) and the Communication Services Select Sector SPDR Fund (XLC) are both among the Top 100 ETFs. VUG is a Vanguard Large Growth fund and XLC is a SPDR State Street Global Advisors Communications fund. So, what’s the difference between VUG and XLC? And which fund is better?
The expense ratio of VUG is 0.08 percentage points lower than XLC’s (0.04% vs. 0.12%). VUG also has a higher exposure to the technology sector and a higher standard deviation. Overall, VUG has provided lower returns than XLC over the past ten years.
In this article, we’ll compare VUG vs. XLC. We’ll look at holdings and annual returns, as well as at their industry exposure and risk metrics. Moreover, I’ll also discuss VUG’s and XLC’s portfolio growth, performance, and fund composition and examine how these affect their overall returns.
Summary
| VUG | XLC | |
| Name | Vanguard Growth Index Fund ETF Shares | Communication Services Select Sector SPDR Fund |
| Category | Large Growth | Communications |
| Issuer | Vanguard | SPDR State Street Global Advisors |
| AUM | 165.53B | 14.09B |
| Avg. Return | 17.58% | 29.04% |
| Div. Yield | 0.57% | 0.62% |
| Expense Ratio | 0.04% | 0.12% |
The Vanguard Growth Index Fund ETF Shares (VUG) is a Large Growth fund that is issued by Vanguard. It currently has 165.53B total assets under management and has yielded an average annual return of 17.58% over the past 10 years. The fund has a dividend yield of 0.57% with an expense ratio of 0.04%.
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%.
VUG’s dividend yield is 0.05% lower than that of XLC (0.57% vs. 0.62%). Also, VUG yielded on average 11.46% less per year over the past decade (17.58% vs. 29.04%). The expense ratio of VUG is 0.08 percentage points lower than XLC’s (0.04% vs. 0.12%).
Fund Composition
Industry Exposure
| VUG | XLC | |
| Technology | 39.05% | 0.0% |
| Industrials | 5.13% | 0.0% |
| Energy | 0.32% | 0.0% |
| Communication Services | 16.49% | 100.0% |
| Utilities | 0.0% | 0.0% |
| Healthcare | 8.09% | 0.0% |
| Consumer Defensive | 2.41% | 0.0% |
| Real Estate | 2.46% | 0.0% |
| Financial Services | 6.75% | 0.0% |
| Consumer Cyclical | 17.78% | 0.0% |
| Basic Materials | 1.52% | 0.0% |
The Vanguard Growth Index Fund ETF Shares (VUG) has the most exposure to the Technology sector at 39.05%. This is followed by Consumer Cyclical and Communication Services at 17.78% and 16.49% respectively. Energy (0.32%), Basic Materials (1.52%), and Consumer Defensive (2.41%) only make up 4.25% of the fund’s total assets.
VUG’s mid-section with moderate exposure is comprised of Real Estate, Industrials, Financial Services, Healthcare, and Communication Services stocks at 2.46%, 5.13%, 6.75%, 8.09%, and 16.49%.
The Communication Services Select Sector SPDR Fund (XLC) has the most exposure to the Communication Services sector at 100.0%. This is followed by Technology and Industrials at 0.0% and 0.0% respectively. Consumer Cyclical (0.0%), Financial Services (0.0%), and Real Estate (0.0%) only make up 0.00% of the fund’s total assets.
XLC’s mid-section with moderate exposure is comprised of Consumer Defensive, Healthcare, Utilities, Energy, and Industrials stocks at 0.0%, 0.0%, 0.0%, 0.0%, and 0.0%.
VUG is 39.05% more exposed to the Technology sector than XLC (39.05% vs 0.0%). VUG’s exposure to Consumer Cyclical and Communication Services stocks is 17.78% higher and 83.51% lower respectively (17.78% vs. 0.0% and 16.49% vs. 100.0%). In total, Energy, Basic Materials, and Consumer Defensive also make up 4.25% more of the fund’s holdings compared to XLC (4.25% vs. 0.00%).
Holdings
| VUG Holdings | Weight |
| Apple Inc | 10.13% |
| Microsoft Corp | 9.52% |
| Amazon.com Inc | 6.88% |
| Facebook Inc Class A | 3.89% |
| Alphabet Inc Class A | 3.43% |
| Alphabet Inc Class C | 3.22% |
| Tesla Inc | 2.44% |
| NVIDIA Corp | 2.21% |
| Visa Inc Class A | 1.78% |
| PayPal Holdings Inc | 1.6% |
VUG’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc Class A, and Alphabet Inc Class A at 10.13%, 9.52%, 6.88%, 3.89%, and 3.43%.
Alphabet Inc Class C (3.22%), Tesla Inc (2.44%), and NVIDIA Corp (2.21%) have a slightly smaller but still significant weight. Visa Inc Class A and PayPal Holdings Inc are also represented in the VUG’s holdings at 1.78% and 1.6%.
| 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%.
Risk Analysis
| VUG | XLC | |
| Mean Return | 1.44 | 0 |
| R-squared | 92.48 | 0 |
| Std. Deviation | 14.76 | 0 |
| Alpha | 1.81 | 0 |
| Beta | 1.04 | 0 |
| Sharpe Ratio | 1.13 | 0 |
| Treynor Ratio | 16.13 | 0 |
The Vanguard Growth Index Fund ETF Shares (VUG) has a Mean Return of 1.44 with a Standard Deviation of 14.76 and a Treynor Ratio of 16.13. Its Sharpe Ratio is 1.13 while VUG’s R-squared is 92.48. Furthermore, the fund has a Beta of 1.04 and a Alpha of 1.81.
The Communication Services Select Sector SPDR Fund (XLC) has a Mean Return of 0 with a Treynor Ratio of 0 and a Sharpe Ratio of 0. Its Beta is 0 while XLC’s R-squared is 0. Furthermore, the fund has a Alpha of 0 and a Standard Deviation of 0.
VUG’s Mean Return is 1.44 points higher than that of XLC and its R-squared is 92.48 points higher. With a Standard Deviation of 14.76, VUG is slightly more volatile than XLC. The Alpha and Beta of VUG are 1.81 points higher and 1.04 points higher than XLC’s Alpha and Beta.
Performance
Annual Returns
| Year | VUG | XLC |
| 2020 | 40.16% | 26.85% |
| 2019 | 37.26% | 31.22% |
| 2018 | -3.32% | 0.0% |
| 2017 | 27.8% | 0.0% |
| 2016 | 6.13% | 0.0% |
| 2015 | 3.32% | 0.0% |
| 2014 | 13.62% | 0.0% |
| 2013 | 32.38% | 0.0% |
| 2012 | 17.03% | 0.0% |
| 2011 | 1.87% | 0.0% |
| 2010 | 17.11% | 0.0% |
VUG had its best year in 2020 with an annual return of 40.16%. VUG’s worst year over the past decade yielded -3.32% and occurred in 2018. In most years the Vanguard Growth Index Fund ETF Shares provided moderate returns such as in 2014, 2012, and 2010 where annual returns amounted to 13.62%, 17.03%, and 17.11% 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
| Fund | Initial Balance | Final Balance | CAGR |
| VUG | $10,000 | $19,238 | 17.58% |
| XLC | $10,000 | $16,645 | 29.04% |
A $10,000 investment in VUG would have resulted in a final balance of $19,238. This is a profit of $9,238 over 2 years and amounts to a compound annual growth rate (CAGR) of 17.58%.
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%.
VUG’s CAGR is 11.46 percentage points lower than that of XLC and as a result, would have yielded $2,593 more on a $10,000 investment. Thus, VUG performed worse than XLC by 11.46% annually.
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