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VUG vs. XLE: What’s The Difference?

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

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

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

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Summary

VUGXLE
NameVanguard Growth Index Fund ETF SharesEnergy Select Sector SPDR Fund
CategoryLarge GrowthEquity Energy
IssuerVanguardSPDR State Street Global Advisors
AUM165.53B25.55B
Avg. Return17.58%1.28%
Div. Yield0.57%3.92%
Expense Ratio0.04%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 Energy Select Sector SPDR Fund (XLE) is a Equity Energy fund that is issued by SPDR State Street Global Advisors. It currently has 25.55B total assets under management and has yielded an average annual return of 1.28% over the past 10 years. The fund has a dividend yield of 3.92% with an expense ratio of 0.12%.

VUG’s dividend yield is 3.35% lower than that of XLE (0.57% vs. 3.92%). Also, VUG yielded on average 16.30% more per year over the past decade (17.58% vs. 1.28%). The expense ratio of VUG is 0.08 percentage points lower than XLE’s (0.04% vs. 0.12%).

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Fund Composition

Industry Exposure

VUG vs. XLE - Industry Exposure

VUGXLE
Technology39.05%0.0%
Industrials5.13%0.0%
Energy0.32%100.0%
Communication Services16.49%0.0%
Utilities0.0%0.0%
Healthcare8.09%0.0%
Consumer Defensive2.41%0.0%
Real Estate2.46%0.0%
Financial Services6.75%0.0%
Consumer Cyclical17.78%0.0%
Basic Materials1.52%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 Energy Select Sector SPDR Fund (XLE) has the most exposure to the Energy 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.

XLE’s mid-section with moderate exposure is comprised of Consumer Defensive, Healthcare, Utilities, Communication Services, 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 XLE (39.05% vs 0.0%). VUG’s exposure to Consumer Cyclical and Communication Services stocks is 17.78% higher and 16.49% higher respectively (17.78% vs. 0.0% and 16.49% vs. 0.0%). In total, Energy, Basic Materials, and Consumer Defensive also make up 95.75% less of the fund’s holdings compared to XLE (4.25% vs. 100.00%).

Holdings

VUG - Holdings

VUG HoldingsWeight
Apple Inc10.13%
Microsoft Corp9.52%
Amazon.com Inc6.88%
Facebook Inc Class A3.89%
Alphabet Inc Class A3.43%
Alphabet Inc Class C3.22%
Tesla Inc2.44%
NVIDIA Corp2.21%
Visa Inc Class A1.78%
PayPal Holdings Inc1.6%

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%.

XLE - Holdings

XLE HoldingsWeight
Exxon Mobil Corp23.7%
Chevron Corp20.03%
ConocoPhillips4.64%
EOG Resources Inc4.46%
Schlumberger Ltd4.43%
Marathon Petroleum Corp4.17%
Pioneer Natural Resources Co4.08%
Phillips 664.07%
Kinder Morgan Inc Class P3.85%
Williams Companies Inc3.5%

XLE’s Top Holdings are Exxon Mobil Corp, Chevron Corp, ConocoPhillips, EOG Resources Inc, and Schlumberger Ltd at 23.7%, 20.03%, 4.64%, 4.46%, and 4.43%.

Marathon Petroleum Corp (4.17%), Pioneer Natural Resources Co (4.08%), and Phillips 66 (4.07%) have a slightly smaller but still significant weight. Kinder Morgan Inc Class P and Williams Companies Inc are also represented in the XLE’s holdings at 3.85% and 3.5%.

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Risk Analysis

VUGXLE
Mean Return1.440.32
R-squared92.4861.84
Std. Deviation14.7627.52
Alpha1.81-11.98
Beta1.041.54
Sharpe Ratio1.130.12
Treynor Ratio16.13-0.4

The Vanguard Growth Index Fund ETF Shares (VUG) has a Sharpe Ratio of 1.13 with a Standard Deviation of 14.76 and a R-squared of 92.48. Its Treynor Ratio is 16.13 while VUG’s Beta is 1.04. Furthermore, the fund has a Mean Return of 1.44 and a Alpha of 1.81.

The Energy Select Sector SPDR Fund (XLE) has a R-squared of 61.84 with a Beta of 1.54 and a Sharpe Ratio of 0.12. Its Treynor Ratio is -0.4 while XLE’s Alpha is -11.98. Furthermore, the fund has a Mean Return of 0.32 and a Standard Deviation of 27.52.

VUG’s Mean Return is 1.12 points higher than that of XLE and its R-squared is 30.64 points higher. With a Standard Deviation of 14.76, VUG is slightly less volatile than XLE. The Alpha and Beta of VUG are 13.79 points higher and 0.50 points lower than XLE’s Alpha and Beta.

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Performance

Annual Returns

VUG vs. XLE - Annual Returns

YearVUGXLE
202040.16%-32.56%
201937.26%11.87%
2018-3.32%-18.1%
201727.8%-1.01%
20166.13%27.95%
20153.32%-21.47%
201413.62%-8.61%
201332.38%26.16%
201217.03%5.17%
20111.87%2.98%
201017.11%21.7%

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 2016 was the strongest year for XLE, returning 27.95% on an annual basis. The poorest year for XLE in the last ten years was 2020, with a yield of -32.56%. Most years the Energy Select Sector SPDR Fund has given investors modest returns, such as in 2017, 2011, and 2012, when gains were -1.01%, 2.98%, and 5.17% respectively.

Portfolio Growth

VUG vs. XLE - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
VUG$10,000$54,73517.58%
XLE$10,000$9,3391.28%

A $10,000 investment in VUG would have resulted in a final balance of $54,735. This is a profit of $44,735 over 11 years and amounts to a compound annual growth rate (CAGR) of 17.58%.

With a $10,000 investment in XLE, the end total would have been $9,339. This equates to a $-661 profit over 11 years and a compound annual growth rate (CAGR) of 1.28%.

VUG’s CAGR is 16.30 percentage points higher than that of XLE and as a result, would have yielded $45,396 more on a $10,000 investment. Thus, VUG outperformed XLE by 16.30% annually.


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