Skip to content

VUG vs. XLY: What’s The Difference?

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

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

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

TIP: Keep track of all your investments with Personal Capital. I use this amazing tool to aggregate all investments in one place and make sure I'm on track to financial freedom. Oh, and did I mention it's free? Try it out here (link to Personal Capital).

Summary

VUGXLY
NameVanguard Growth Index Fund ETF SharesConsumer Discretionary Select Sector SPDR Fund
CategoryLarge GrowthConsumer Cyclical
IssuerVanguardSPDR State Street Global Advisors
AUM165.53B20.21B
Avg. Return17.58%18.86%
Div. Yield0.57%0.63%
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 Consumer Discretionary Select Sector SPDR Fund (XLY) is a Consumer Cyclical fund that is issued by SPDR State Street Global Advisors. It currently has 20.21B total assets under management and has yielded an average annual return of 18.86% over the past 10 years. The fund has a dividend yield of 0.63% with an expense ratio of 0.12%.

VUG’s dividend yield is 0.06% lower than that of XLY (0.57% vs. 0.63%). Also, VUG yielded on average 1.28% less per year over the past decade (17.58% vs. 18.86%). The expense ratio of VUG is 0.08 percentage points lower than XLY’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).

Fund Composition

Industry Exposure

VUG vs. XLY - Industry Exposure

VUGXLY
Technology39.05%0.57%
Industrials5.13%0.0%
Energy0.32%0.0%
Communication Services16.49%0.0%
Utilities0.0%0.0%
Healthcare8.09%0.0%
Consumer Defensive2.41%5.34%
Real Estate2.46%0.0%
Financial Services6.75%0.0%
Consumer Cyclical17.78%94.1%
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 Consumer Discretionary Select Sector SPDR Fund (XLY) has the most exposure to the Consumer Cyclical sector at 94.1%. This is followed by Consumer Defensive and Technology at 5.34% and 0.57% respectively. Financial Services (0.0%), Real Estate (0.0%), and Healthcare (0.0%) only make up 0.00% of the fund’s total assets.

XLY’s mid-section with moderate exposure is comprised of Utilities, Communication Services, Energy, Industrials, and Technology stocks at 0.0%, 0.0%, 0.0%, 0.0%, and 0.57%.

VUG is 38.48% more exposed to the Technology sector than XLY (39.05% vs 0.57%). VUG’s exposure to Consumer Cyclical and Communication Services stocks is 76.32% lower and 16.49% higher respectively (17.78% vs. 94.1% and 16.49% vs. 0.0%). In total, Energy, Basic Materials, and Consumer Defensive also make up 1.09% less of the fund’s holdings compared to XLY (4.25% vs. 5.34%).

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%.

XLY - Holdings

XLY HoldingsWeight
Amazon.com Inc22.9%
Tesla Inc13.5%
The Home Depot Inc8.74%
McDonald’s Corp4.5%
Nike Inc B4.45%
Lowe’s Companies Inc3.58%
Starbucks Corp3.44%
Target Corp3.12%
Booking Holdings Inc2.35%
TJX Companies Inc2.12%

XLY’s Top Holdings are Amazon.com Inc, Tesla Inc, The Home Depot Inc, McDonald’s Corp, and Nike Inc B at 22.9%, 13.5%, 8.74%, 4.5%, and 4.45%.

Lowe’s Companies Inc (3.58%), Starbucks Corp (3.44%), and Target Corp (3.12%) have a slightly smaller but still significant weight. Booking Holdings Inc and TJX Companies Inc are also represented in the XLY’s holdings at 2.35% and 2.12%.

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).

Risk Analysis

VUGXLY
Mean Return1.441.47
R-squared92.4880.84
Std. Deviation14.7615.97
Alpha1.816.96
Beta1.041.02
Sharpe Ratio1.131.06
Treynor Ratio16.1316.69

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

The Consumer Discretionary Select Sector SPDR Fund (XLY) has a Standard Deviation of 15.97 with a Sharpe Ratio of 1.06 and a Alpha of 6.96. Its Beta is 1.02 while XLY’s Treynor Ratio is 16.69. Furthermore, the fund has a Mean Return of 1.47 and a R-squared of 80.84.

VUG’s Mean Return is 0.03 points lower than that of XLY and its R-squared is 11.64 points higher. With a Standard Deviation of 14.76, VUG is slightly less volatile than XLY. The Alpha and Beta of VUG are 5.15 points lower and 0.02 points higher than XLY’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!

Performance

Annual Returns

VUG vs. XLY - Annual Returns

YearVUGXLY
202040.16%29.66%
201937.26%28.43%
2018-3.32%1.66%
201727.8%22.77%
20166.13%5.87%
20153.32%9.93%
201413.62%9.49%
201332.38%42.74%
201217.03%23.6%
20111.87%5.98%
201017.11%27.36%

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 XLY, returning 42.74% on an annual basis. The poorest year for XLY in the last ten years was 2018, with a yield of 1.66%. Most years the Consumer Discretionary Select Sector SPDR Fund has given investors modest returns, such as in 2015, 2017, and 2012, when gains were 9.93%, 22.77%, and 23.6% respectively.

Portfolio Growth

VUG vs. XLY - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
VUG$10,000$54,73517.58%
XLY$10,000$63,06618.86%

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 XLY, the end total would have been $63,066. This equates to a $53,066 profit over 11 years and a compound annual growth rate (CAGR) of 18.86%.

VUG’s CAGR is 1.28 percentage points lower than that of XLY and as a result, would have yielded $8,331 less on a $10,000 investment. Thus, VUG performed worse than XLY by 1.28% annually.


Current recommendations:

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.

Leave a Reply

Your email address will not be published.