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VUG vs. XLV: What’s The Difference?

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

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

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

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Summary

VUGXLV
NameVanguard Growth Index Fund ETF SharesHealth Care Select Sector SPDR Fund
CategoryLarge GrowthHealth
IssuerVanguardSPDR State Street Global Advisors
AUM165.53B27.88B
Avg. Return17.58%15.02%
Div. Yield0.57%1.4%
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 Health Care Select Sector SPDR Fund (XLV) is a Health fund that is issued by SPDR State Street Global Advisors. It currently has 27.88B total assets under management and has yielded an average annual return of 15.02% over the past 10 years. The fund has a dividend yield of 1.4% with an expense ratio of 0.12%.

VUG’s dividend yield is 0.83% lower than that of XLV (0.57% vs. 1.4%). Also, VUG yielded on average 2.55% more per year over the past decade (17.58% vs. 15.02%). The expense ratio of VUG is 0.08 percentage points lower than XLV’s (0.04% vs. 0.12%).

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Fund Composition

Industry Exposure

VUG vs. XLV - Industry Exposure

VUGXLV
Technology39.05%0.0%
Industrials5.13%0.0%
Energy0.32%0.0%
Communication Services16.49%0.0%
Utilities0.0%0.0%
Healthcare8.09%100.0%
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 Health Care Select Sector SPDR Fund (XLV) has the most exposure to the Healthcare 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.

XLV’s mid-section with moderate exposure is comprised of Consumer Defensive, 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 XLV (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 XLV (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%.

XLV - Holdings

XLV HoldingsWeight
Johnson & Johnson9.19%
UnitedHealth Group Inc8.01%
Pfizer Inc4.64%
Abbott Laboratories4.36%
AbbVie Inc4.21%
Thermo Fisher Scientific Inc4.2%
Merck & Co Inc4.17%
Eli Lilly and Co3.87%
Danaher Corp3.61%
Medtronic PLC3.54%

XLV’s Top Holdings are Johnson & Johnson, UnitedHealth Group Inc, Pfizer Inc, Abbott Laboratories, and AbbVie Inc at 9.19%, 8.01%, 4.64%, 4.36%, and 4.21%.

Thermo Fisher Scientific Inc (4.2%), Merck & Co Inc (4.17%), and Eli Lilly and Co (3.87%) have a slightly smaller but still significant weight. Danaher Corp and Medtronic PLC are also represented in the XLV’s holdings at 3.61% and 3.54%.

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Risk Analysis

VUGXLV
Mean Return1.441.27
R-squared92.4858.19
Std. Deviation14.7612.94
Alpha1.817.75
Beta1.040.7
Sharpe Ratio1.131.13
Treynor Ratio16.1321.1

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

The Health Care Select Sector SPDR Fund (XLV) has a Treynor Ratio of 21.1 with a R-squared of 58.19 and a Beta of 0.7. Its Standard Deviation is 12.94 while XLV’s Mean Return is 1.27. Furthermore, the fund has a Sharpe Ratio of 1.13 and a Alpha of 7.75.

VUG’s Mean Return is 0.17 points higher than that of XLV and its R-squared is 34.29 points higher. With a Standard Deviation of 14.76, VUG is slightly more volatile than XLV. The Alpha and Beta of VUG are 5.94 points lower and 0.34 points higher than XLV’s Alpha and Beta.

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Performance

Annual Returns

VUG vs. XLV - Annual Returns

YearVUGXLV
202040.16%13.33%
201937.26%20.63%
2018-3.32%6.3%
201727.8%21.7%
20166.13%-2.83%
20153.32%6.82%
201413.62%25.17%
201332.38%41.24%
201217.03%17.56%
20111.87%12.44%
201017.11%2.91%

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 XLV, returning 41.24% on an annual basis. The poorest year for XLV in the last ten years was 2016, with a yield of -2.83%. Most years the Health Care Select Sector SPDR Fund has given investors modest returns, such as in 2011, 2020, and 2012, when gains were 12.44%, 13.33%, and 17.56% respectively.

Portfolio Growth

VUG vs. XLV - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
VUG$10,000$54,73517.58%
XLV$10,000$44,14715.02%

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 XLV, the end total would have been $44,147. This equates to a $34,147 profit over 11 years and a compound annual growth rate (CAGR) of 15.02%.

VUG’s CAGR is 2.55 percentage points higher than that of XLV and as a result, would have yielded $10,588 more on a $10,000 investment. Thus, VUG outperformed XLV by 2.55% annually.


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