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VUG vs. XLF: What’s The Difference?

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

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

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

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Summary

VUGXLF
NameVanguard Growth Index Fund ETF SharesFinancial Select Sector SPDR Fund
CategoryLarge GrowthFinancial
IssuerVanguardSPDR State Street Global Advisors
AUM165.53B40.81B
Avg. Return17.58%12.17%
Div. Yield0.57%1.57%
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 Financial Select Sector SPDR Fund (XLF) is a Financial fund that is issued by SPDR State Street Global Advisors. It currently has 40.81B total assets under management and has yielded an average annual return of 12.17% over the past 10 years. The fund has a dividend yield of 1.57% with an expense ratio of 0.12%.

VUG’s dividend yield is 1.00% lower than that of XLF (0.57% vs. 1.57%). Also, VUG yielded on average 5.41% more per year over the past decade (17.58% vs. 12.17%). The expense ratio of VUG is 0.08 percentage points lower than XLF’s (0.04% vs. 0.12%).

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Fund Composition

Industry Exposure

VUG vs. XLF - Industry Exposure

VUGXLF
Technology39.05%0.0%
Industrials5.13%0.0%
Energy0.32%0.0%
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%100.0%
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 Financial Select Sector SPDR Fund (XLF) has the most exposure to the Financial Services sector at 100.0%. This is followed by Technology and Industrials at 0.0% and 0.0% 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.

XLF’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 0.0%.

VUG is 39.05% more exposed to the Technology sector than XLF (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 4.25% more of the fund’s holdings compared to XLF (4.25% vs. 0.00%).

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%.

XLF - Holdings

XLF HoldingsWeight
Berkshire Hathaway Inc Class B12.83%
JPMorgan Chase & Co11.47%
Bank of America Corp7.57%
Wells Fargo & Co4.56%
Citigroup Inc3.56%
Morgan Stanley3.32%
Goldman Sachs Group Inc3.15%
BlackRock Inc3.02%
Charles Schwab Corp2.66%
American Express Co2.62%

XLF’s Top Holdings are Berkshire Hathaway Inc Class B, JPMorgan Chase & Co, Bank of America Corp, Wells Fargo & Co, and Citigroup Inc at 12.83%, 11.47%, 7.57%, 4.56%, and 3.56%.

Morgan Stanley (3.32%), Goldman Sachs Group Inc (3.15%), and BlackRock Inc (3.02%) have a slightly smaller but still significant weight. Charles Schwab Corp and American Express Co are also represented in the XLF’s holdings at 2.66% and 2.62%.

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Risk Analysis

VUGXLF
Mean Return1.441.21
R-squared92.4873.26
Std. Deviation14.7618.86
Alpha1.812.63
Beta1.041.15
Sharpe Ratio1.130.74
Treynor Ratio16.1311.25

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

The Financial Select Sector SPDR Fund (XLF) has a Treynor Ratio of 11.25 with a Mean Return of 1.21 and a Alpha of 2.63. Its Beta is 1.15 while XLF’s R-squared is 73.26. Furthermore, the fund has a Sharpe Ratio of 0.74 and a Standard Deviation of 18.86.

VUG’s Mean Return is 0.23 points higher than that of XLF and its R-squared is 19.22 points higher. With a Standard Deviation of 14.76, VUG is slightly less volatile than XLF. The Alpha and Beta of VUG are 0.82 points lower and 0.11 points lower than XLF’s Alpha and Beta.

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Performance

Annual Returns

VUG vs. XLF - Annual Returns

YearVUGXLF
202040.16%-1.68%
201937.26%31.88%
2018-3.32%-13.09%
201727.8%22.03%
20166.13%22.55%
20153.32%-1.6%
201413.62%15.02%
201332.38%35.37%
201217.03%28.53%
20111.87%-17.16%
201017.11%11.97%

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 2013 was the strongest year for XLF, returning 35.37% on an annual basis. The poorest year for XLF in the last ten years was 2011, with a yield of -17.16%. Most years the Financial Select Sector SPDR Fund has given investors modest returns, such as in 2010, 2014, and 2017, when gains were 11.97%, 15.02%, and 22.03% respectively.

Portfolio Growth

VUG vs. XLF - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
VUG$10,000$54,73517.58%
XLF$10,000$30,78212.17%

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 XLF, the end total would have been $30,782. This equates to a $20,782 profit over 11 years and a compound annual growth rate (CAGR) of 12.17%.

VUG’s CAGR is 5.41 percentage points higher than that of XLF and as a result, would have yielded $23,953 more on a $10,000 investment. Thus, VUG outperformed XLF by 5.41% annually.


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