The Vanguard Growth Index Fund ETF Shares (VUG) and the Industrial Select Sector SPDR Fund (XLI) are both among the Top 100 ETFs. VUG is a Vanguard Large Growth fund and XLI is a SPDR State Street Global Advisors Industrials fund. So, what’s the difference between VUG and XLI? And which fund is better?
The expense ratio of VUG is 0.08 percentage points lower than XLI’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 XLI over the past ten years.
In this article, we’ll compare VUG vs. XLI. We’ll look at annual returns and holdings, as well as at their industry exposure and risk metrics. Moreover, I’ll also discuss VUG’s and XLI’s fund composition, portfolio growth, and performance and examine how these affect their overall returns.
|Name||Vanguard Growth Index Fund ETF Shares||Industrial Select Sector SPDR Fund|
|Issuer||Vanguard||SPDR State Street Global Advisors|
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 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%.
VUG’s dividend yield is 0.68% lower than that of XLI (0.57% vs. 1.25%). Also, VUG yielded on average 3.14% more per year over the past decade (17.58% vs. 14.44%). The expense ratio of VUG 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).
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 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%.
VUG is 37.23% more exposed to the Technology sector than XLI (39.05% vs 1.82%). VUG’s exposure to Consumer Cyclical and Communication Services stocks is 17.09% higher and 16.49% higher respectively (17.78% vs. 0.69% 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 XLI (4.25% vs. 0.00%).
|Facebook Inc Class A||3.89%|
|Alphabet Inc Class A||3.43%|
|Alphabet Inc Class C||3.22%|
|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%.
|Honeywell International Inc||4.9%|
|United Parcel Service Inc Class B||4.84%|
|Union Pacific Corp||4.7%|
|Raytheon Technologies Corp||4.16%|
|General Electric Co||3.8%|
|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).
The Vanguard Growth Index Fund ETF Shares (VUG) has a Alpha of 1.81 with a Standard Deviation of 14.76 and a Beta of 1.04. Its Sharpe Ratio is 1.13 while VUG’s Treynor Ratio is 16.13. Furthermore, the fund has a Mean Return of 1.44 and a R-squared of 92.48.
The Industrial Select Sector SPDR Fund (XLI) has a Sharpe Ratio of 0.76 with a Standard Deviation of 17.13 and a Mean Return of 1.14. Its R-squared is 78.97 while XLI’s Treynor Ratio is 11.34. Furthermore, the fund has a Alpha of 2.38 and a Beta of 1.08.
VUG’s Mean Return is 0.30 points higher than that of XLI and its R-squared is 13.51 points higher. With a Standard Deviation of 14.76, VUG is slightly less volatile than XLI. The Alpha and Beta of VUG are 0.57 points lower and 0.04 points lower than XLI’s Alpha and Beta.
FYI: Another great way to get exposure to the real estate sector is by investing in real estate debt. Groundfloor offers fantastic short-term, high-yield bonds that can add diversification to your portfolio!
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 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.
|Fund||Initial Balance||Final Balance||CAGR|
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 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%.
VUG’s CAGR is 3.14 percentage points higher than that of XLI and as a result, would have yielded $14,882 more on a $10,000 investment. Thus, VUG outperformed XLI by 3.14% annually.
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)Personal Capital is simply the best tool out there to track your net worth and plan for financial freedom. Just their retirement planner alone has become an invaluable tool to keep myself on track financially. Try it out, it's free!
2) 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!
3) 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!).
4) Groundfloor is another great way to get exposure to the real estate sector by investing in short-term, high-yield real estate debt. Current returns are >10% and you can get started with just $10.
5) If you are interested in startup investing, check out Mainvest. I've started allocating a small amount of assets to invest in and support small businesses. Return targets are between 10-25% and you can start with just $100!
To see all of my most up-to-date recommendations, check out the Recommended Tools section.