The Vanguard Growth Index Fund ETF Shares (VUG) and the Technology Select Sector SPDR Fund (XLK) are both among the Top 100 ETFs. VUG is a Vanguard Large Growth fund and XLK is a SPDR State Street Global Advisors Technology fund. So, what’s the difference between VUG and XLK? And which fund is better?
The expense ratio of VUG is 0.08 percentage points lower than XLK’s (0.04% vs. 0.12%). VUG also has a lower exposure to the technology sector and a lower standard deviation. Overall, VUG has provided lower returns than XLK over the past ten years.
In this article, we’ll compare VUG vs. XLK. We’ll look at portfolio growth and industry exposure, as well as at their performance and risk metrics. Moreover, I’ll also discuss VUG’s and XLK’s fund composition, holdings, and annual returns and examine how these affect their overall returns.
|Name||Vanguard Growth Index Fund ETF Shares||Technology 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 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%.
VUG’s dividend yield is 0.16% lower than that of XLK (0.57% vs. 0.73%). Also, VUG yielded on average 2.45% less per year over the past decade (17.58% vs. 20.02%). The expense ratio of VUG is 0.08 percentage points lower than XLK’s (0.04% vs. 0.12%).
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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 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%.
VUG is 48.49% less exposed to the Technology sector than XLK (39.05% vs 87.54%). 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 XLK (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%.
|Visa Inc Class A||3.95%|
|PayPal Holdings Inc||3.42%|
|Mastercard Inc A||3.19%|
|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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The Vanguard Growth Index Fund ETF Shares (VUG) has a Mean Return of 1.44 with a R-squared of 92.48 and a Sharpe Ratio of 1.13. Its Treynor Ratio is 16.13 while VUG’s Standard Deviation is 14.76. Furthermore, the fund has a Beta of 1.04 and a Alpha of 1.81.
The Technology Select Sector SPDR Fund (XLK) has a Treynor Ratio of 21.44 with a Mean Return of 1.7 and a Standard Deviation of 15.58. Its Sharpe Ratio is 1.27 while XLK’s R-squared is 73.56. Furthermore, the fund has a Beta of 0.95 and a Alpha of 10.43.
VUG’s Mean Return is 0.26 points lower than that of XLK and its R-squared is 18.92 points higher. With a Standard Deviation of 14.76, VUG is slightly less volatile than XLK. The Alpha and Beta of VUG are 8.62 points lower and 0.09 points higher than XLK’s Alpha and Beta.
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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 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.
|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 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%.
VUG’s CAGR is 2.45 percentage points lower than that of XLK and as a result, would have yielded $13,055 less on a $10,000 investment. Thus, VUG performed worse than XLK by 2.45% annually.
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