The Vanguard Total International Stock Index Fund ETF Shares (VXUS) and the Financial Select Sector SPDR Fund (XLF) are both among the Top 100 ETFs. VXUS is a Vanguard Foreign Large Blend fund and XLF is a SPDR State Street Global Advisors Financial fund. So, what’s the difference between VXUS and XLF? And which fund is better?
The expense ratio of VXUS is 0.04 percentage points lower than XLF’s (0.08% vs. 0.12%). VXUS also has a lower exposure to the financial services sector and a lower standard deviation. Overall, VXUS has provided lower returns than XLF over the past ten years.
In this article, we’ll compare VXUS vs. XLF. We’ll look at risk metrics and holdings, as well as at their performance and fund composition. Moreover, I’ll also discuss VXUS’s and XLF’s annual returns, portfolio growth, and industry exposure and examine how these affect their overall returns.
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!
|Name||Vanguard Total International Stock Index Fund ETF Shares||Financial Select Sector SPDR Fund|
|Category||Foreign Large Blend||Financial|
|Issuer||Vanguard||SPDR State Street Global Advisors|
The Vanguard Total International Stock Index Fund ETF Shares (VXUS) is a Foreign Large Blend fund that is issued by Vanguard. It currently has 404.73B total assets under management and has yielded an average annual return of 8.41% over the past 10 years. The fund has a dividend yield of 2.44% with an expense ratio of 0.08%.
The Financial Select Sector SPDR Fund (XLF) is a Financial fund that is issued by SPDR State Street Global Advisors. It currently has 40.81B total assets under management and has yielded an average annual return of 12.17% over the past 10 years. The fund has a dividend yield of 1.57% with an expense ratio of 0.12%.
VXUS’s dividend yield is 0.87% higher than that of XLF (2.44% vs. 1.57%). Also, VXUS yielded on average 3.76% less per year over the past decade (8.41% vs. 12.17%). The expense ratio of VXUS is 0.04 percentage points lower than XLF’s (0.08% vs. 0.12%).
FYI: The best way I've found to invest is through M1 Finance. It's free and you even get an instant line of credit and 100$! Have a look here (link to M1 Finance).
The Vanguard Total International Stock Index Fund ETF Shares (VXUS) has the most exposure to the Financial Services sector at 17.64%. This is followed by Technology and Industrials at 13.07% and 12.94% respectively. Real Estate (3.79%), Energy (4.55%), and Communication Services (7.06%) only make up 15.40% of the fund’s total assets.
VXUS’s mid-section with moderate exposure is comprised of Consumer Defensive, Basic Materials, Healthcare, Consumer Cyclical, and Industrials stocks at 7.83%, 8.37%, 9.19%, 12.64%, and 12.94%.
The Financial Select Sector SPDR Fund (XLF) has the most exposure to the Financial Services sector at 100.0%. This is followed by Technology and Industrials at 0.0% and 0.0% 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.
XLF’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 0.0%.
VXUS is 82.36% less exposed to the Financial Services sector than XLF (17.64% vs 100.0%). VXUS’s exposure to Technology and Industrials stocks is 13.07% higher and 12.94% higher respectively (13.07% vs. 0.0% and 12.94% vs. 0.0%). In total, Real Estate, Energy, and Communication Services also make up 15.40% more of the fund’s holdings compared to XLF (15.40% vs. 0.00%).
|Taiwan Semiconductor Manufacturing Co Ltd||1.62%|
|Tencent Holdings Ltd||1.41%|
|Alibaba Group Holding Ltd Ordinary Shares||1.26%|
|Samsung Electronics Co Ltd||1.05%|
|ASML Holding NV||0.86%|
|Roche Holding AG||0.81%|
|Toyota Motor Corp||0.67%|
|LVMH Moet Hennessy Louis Vuitton SE||0.61%|
VXUS’s Top Holdings are Taiwan Semiconductor Manufacturing Co Ltd, Tencent Holdings Ltd, Alibaba Group Holding Ltd Ordinary Shares, Nestle SA, and Samsung Electronics Co Ltd at 1.62%, 1.41%, 1.26%, 1.1%, and 1.05%.
ASML Holding NV (0.86%), Roche Holding AG (0.81%), and Toyota Motor Corp (0.67%) have a slightly smaller but still significant weight. LVMH Moet Hennessy Louis Vuitton SE and Novartis AG are also represented in the VXUS’s holdings at 0.61% and 0.6%.
|Berkshire Hathaway Inc Class B||12.83%|
|JPMorgan Chase & Co||11.47%|
|Bank of America Corp||7.57%|
|Wells Fargo & Co||4.56%|
|Goldman Sachs Group Inc||3.15%|
|Charles Schwab Corp||2.66%|
|American Express Co||2.62%|
XLF’s Top Holdings are Berkshire Hathaway Inc Class B, JPMorgan Chase & Co, Bank of America Corp, Wells Fargo & Co, and Citigroup Inc at 12.83%, 11.47%, 7.57%, 4.56%, and 3.56%.
Morgan Stanley (3.32%), Goldman Sachs Group Inc (3.15%), and BlackRock Inc (3.02%) have a slightly smaller but still significant weight. Charles Schwab Corp and American Express Co are also represented in the XLF’s holdings at 2.66% and 2.62%.
The Vanguard Total International Stock Index Fund ETF Shares (VXUS) has a R-squared of 98.39 with a Mean Return of 0.56 and a Treynor Ratio of 5.14. Its Alpha is 0.31 while VXUS’s Standard Deviation is 15.12. Furthermore, the fund has a Beta of 0.99 and a Sharpe Ratio of 0.4.
The Financial Select Sector SPDR Fund (XLF) has a Standard Deviation of 18.86 with a Beta of 1.15 and a Mean Return of 1.21. Its Alpha is 2.63 while XLF’s R-squared is 73.26. Furthermore, the fund has a Treynor Ratio of 11.25 and a Sharpe Ratio of 0.74.
VXUS’s Mean Return is 0.65 points lower than that of XLF and its R-squared is 25.13 points higher. With a Standard Deviation of 15.12, VXUS is slightly less volatile than XLF. The Alpha and Beta of VXUS are 2.32 points lower and 0.16 points lower than XLF’s Alpha and Beta.
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).
VXUS had its best year in 2017 with an annual return of 27.52%. VXUS’s worst year over the past decade yielded -14.42% and occurred in 2018. In most years the Vanguard Total International Stock Index Fund ETF Shares provided moderate returns such as in 2010, 2016, and 2020 where annual returns amounted to 0.0%, 4.72%, and 11.32% respectively.
The year 2013 was the strongest year for XLF, returning 35.37% on an annual basis. The poorest year for XLF in the last ten years was 2011, with a yield of -17.16%. Most years the Financial Select Sector SPDR Fund has given investors modest returns, such as in 2010, 2014, and 2017, when gains were 11.97%, 15.02%, and 22.03% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in VXUS would have resulted in a final balance of $19,315. This is a profit of $9,315 over 9 years and amounts to a compound annual growth rate (CAGR) of 8.41%.
With a $10,000 investment in XLF, the end total would have been $33,186. This equates to a $23,186 profit over 9 years and a compound annual growth rate (CAGR) of 12.17%.
VXUS’s CAGR is 3.76 percentage points lower than that of XLF and as a result, would have yielded $13,871 less on a $10,000 investment. Thus, VXUS performed worse than XLF by 3.76% 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.