The Vanguard FTSE Emerging Markets Index Fund ETF Shares (VWO) and the Health Care Select Sector SPDR Fund (XLV) are both among the Top 100 ETFs. VWO is a Vanguard Diversified Emerging Mkts fund and XLV is a SPDR State Street Global Advisors Health fund. So, what’s the difference between VWO and XLV? And which fund is better?
The expense ratio of VWO is 0.02 percentage points lower than XLV’s (0.1% vs. 0.12%). VWO also has a higher exposure to the financial services sector and a higher standard deviation. Overall, VWO has provided lower returns than XLV over the past ten years.
In this article, we’ll compare VWO vs. XLV. We’ll look at industry exposure and performance, as well as at their holdings and portfolio growth. Moreover, I’ll also discuss VWO’s and XLV’s risk metrics, fund composition, and annual returns and examine how these affect their overall returns.
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Summary
| VWO | XLV | |
| Name | Vanguard FTSE Emerging Markets Index Fund ETF Shares | Health Care Select Sector SPDR Fund |
| Category | Diversified Emerging Mkts | Health |
| Issuer | Vanguard | SPDR State Street Global Advisors |
| AUM | 117.28B | 27.88B |
| Avg. Return | 5.79% | 15.02% |
| Div. Yield | 1.98% | 1.4% |
| Expense Ratio | 0.1% | 0.12% |
The Vanguard FTSE Emerging Markets Index Fund ETF Shares (VWO) is a Diversified Emerging Mkts fund that is issued by Vanguard. It currently has 117.28B total assets under management and has yielded an average annual return of 5.79% over the past 10 years. The fund has a dividend yield of 1.98% with an expense ratio of 0.1%.
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%.
VWO’s dividend yield is 0.58% higher than that of XLV (1.98% vs. 1.4%). Also, VWO yielded on average 9.24% less per year over the past decade (5.79% vs. 15.02%). The expense ratio of VWO is 0.02 percentage points lower than XLV’s (0.1% vs. 0.12%).
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Fund Composition
Industry Exposure
| VWO | XLV | |
| Technology | 17.06% | 0.0% |
| Industrials | 5.95% | 0.0% |
| Energy | 5.48% | 0.0% |
| Communication Services | 11.41% | 0.0% |
| Utilities | 2.55% | 0.0% |
| Healthcare | 5.33% | 100.0% |
| Consumer Defensive | 5.87% | 0.0% |
| Real Estate | 3.13% | 0.0% |
| Financial Services | 18.15% | 0.0% |
| Consumer Cyclical | 16.1% | 0.0% |
| Basic Materials | 8.98% | 0.0% |
The Vanguard FTSE Emerging Markets Index Fund ETF Shares (VWO) has the most exposure to the Financial Services sector at 18.15%. This is followed by Technology and Consumer Cyclical at 17.06% and 16.1% respectively. Real Estate (3.13%), Healthcare (5.33%), and Energy (5.48%) only make up 13.94% of the fund’s total assets.
VWO’s mid-section with moderate exposure is comprised of Consumer Defensive, Industrials, Basic Materials, Communication Services, and Consumer Cyclical stocks at 5.87%, 5.95%, 8.98%, 11.41%, and 16.1%.
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%.
VWO is 18.15% more exposed to the Financial Services sector than XLV (18.15% vs 0.0%). VWO’s exposure to Technology and Consumer Cyclical stocks is 17.06% higher and 16.10% higher respectively (17.06% vs. 0.0% and 16.1% vs. 0.0%). In total, Real Estate, Healthcare, and Energy also make up 86.06% less of the fund’s holdings compared to XLV (13.94% vs. 100.00%).
Holdings
| VWO Holdings | Weight |
| Tencent Holdings Ltd | 5.29% |
| Alibaba Group Holding Ltd Ordinary Shares | 4.73% |
| Taiwan Semiconductor Manufacturing Co Ltd | 4.58% |
| Meituan | 1.88% |
| Taiwan Semiconductor Manufacturing Co Ltd ADR | 1.7% |
| Reliance Industries Ltd Shs Dematerialised | 1.06% |
| Naspers Ltd Class N | 1.01% |
| Vale SA | 0.92% |
| Infosys Ltd | 0.91% |
| China Construction Bank Corp Class H | 0.84% |
VWO’s Top Holdings are Tencent Holdings Ltd, Alibaba Group Holding Ltd Ordinary Shares, Taiwan Semiconductor Manufacturing Co Ltd, Meituan, and Taiwan Semiconductor Manufacturing Co Ltd ADR at 5.29%, 4.73%, 4.58%, 1.88%, and 1.7%.
Reliance Industries Ltd Shs Dematerialised (1.06%), Naspers Ltd Class N (1.01%), and Vale SA (0.92%) have a slightly smaller but still significant weight. Infosys Ltd and China Construction Bank Corp Class H are also represented in the VWO’s holdings at 0.91% and 0.84%.
| XLV Holdings | Weight |
| Johnson & Johnson | 9.19% |
| UnitedHealth Group Inc | 8.01% |
| Pfizer Inc | 4.64% |
| Abbott Laboratories | 4.36% |
| AbbVie Inc | 4.21% |
| Thermo Fisher Scientific Inc | 4.2% |
| Merck & Co Inc | 4.17% |
| Eli Lilly and Co | 3.87% |
| Danaher Corp | 3.61% |
| Medtronic PLC | 3.54% |
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%.
Risk Analysis
| VWO | XLV | |
| Mean Return | 0.45 | 1.27 |
| R-squared | 81.69 | 58.19 |
| Std. Deviation | 17.64 | 12.94 |
| Alpha | -1.36 | 7.75 |
| Beta | 1.06 | 0.7 |
| Sharpe Ratio | 0.27 | 1.13 |
| Treynor Ratio | 3.14 | 21.1 |
The Vanguard FTSE Emerging Markets Index Fund ETF Shares (VWO) has a Beta of 1.06 with a R-squared of 81.69 and a Alpha of -1.36. Its Mean Return is 0.45 while VWO’s Treynor Ratio is 3.14. Furthermore, the fund has a Sharpe Ratio of 0.27 and a Standard Deviation of 17.64.
The Health Care Select Sector SPDR Fund (XLV) has a Treynor Ratio of 21.1 with a R-squared of 58.19 and a Mean Return of 1.27. Its Alpha is 7.75 while XLV’s Standard Deviation is 12.94. Furthermore, the fund has a Beta of 0.7 and a Sharpe Ratio of 1.13.
VWO’s Mean Return is 0.82 points lower than that of XLV and its R-squared is 23.50 points higher. With a Standard Deviation of 17.64, VWO is slightly more volatile than XLV. The Alpha and Beta of VWO are 9.11 points lower and 0.36 points higher than XLV’s Alpha and Beta.
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Performance
Annual Returns
| Year | VWO | XLV |
| 2020 | 15.32% | 13.33% |
| 2019 | 20.4% | 20.63% |
| 2018 | -14.57% | 6.3% |
| 2017 | 31.38% | 21.7% |
| 2016 | 11.75% | -2.83% |
| 2015 | -15.35% | 6.82% |
| 2014 | 0.6% | 25.17% |
| 2013 | -5.0% | 41.24% |
| 2012 | 18.84% | 17.56% |
| 2011 | -18.68% | 12.44% |
| 2010 | 18.99% | 2.91% |
VWO had its best year in 2017 with an annual return of 31.38%. VWO’s worst year over the past decade yielded -18.68% and occurred in 2011. In most years the Vanguard FTSE Emerging Markets Index Fund ETF Shares provided moderate returns such as in 2014, 2016, and 2020 where annual returns amounted to 0.6%, 11.75%, and 15.32% 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
| Fund | Initial Balance | Final Balance | CAGR |
| VWO | $10,000 | $16,200 | 5.79% |
| XLV | $10,000 | $44,147 | 15.02% |
A $10,000 investment in VWO would have resulted in a final balance of $16,200. This is a profit of $6,200 over 11 years and amounts to a compound annual growth rate (CAGR) of 5.79%.
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%.
VWO’s CAGR is 9.24 percentage points lower than that of XLV and as a result, would have yielded $27,947 less on a $10,000 investment. Thus, VWO performed worse than XLV by 9.24% annually.
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