VYM vs. XLE: What’s The Difference?

The Vanguard High Dividend Yield Index Fund ETF Shares (VYM) and the Energy Select Sector SPDR Fund (XLE) are both among the Top 100 ETFs. VYM is a Vanguard Large Value fund and XLE is a SPDR State Street Global Advisors Equity Energy fund. So, what’s the difference between VYM and XLE? And which fund is better?

The expense ratio of VYM is 0.06 percentage points lower than XLE’s (0.06% vs. 0.12%). VYM also has a higher exposure to the financial services sector and a lower standard deviation. Overall, VYM has provided higher returns than XLE over the past ten years.

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

Summary

VYM XLE
Name Vanguard High Dividend Yield Index Fund ETF Shares Energy Select Sector SPDR Fund
Category Large Value Equity Energy
Issuer Vanguard SPDR State Street Global Advisors
AUM 48.5B 25.55B
Avg. Return 12.20% 1.28%
Div. Yield 2.79% 3.92%
Expense Ratio 0.06% 0.12%

The Vanguard High Dividend Yield Index Fund ETF Shares (VYM) is a Large Value fund that is issued by Vanguard. It currently has 48.5B total assets under management and has yielded an average annual return of 12.20% over the past 10 years. The fund has a dividend yield of 2.79% with an expense ratio of 0.06%.

The Energy Select Sector SPDR Fund (XLE) is a Equity Energy fund that is issued by SPDR State Street Global Advisors. It currently has 25.55B total assets under management and has yielded an average annual return of 1.28% over the past 10 years. The fund has a dividend yield of 3.92% with an expense ratio of 0.12%.

VYM’s dividend yield is 1.13% lower than that of XLE (2.79% vs. 3.92%). Also, VYM yielded on average 10.92% more per year over the past decade (12.20% vs. 1.28%). The expense ratio of VYM is 0.06 percentage points lower than XLE’s (0.06% vs. 0.12%).

Fund Composition

Industry Exposure

VYM vs. XLE - Industry Exposure

VYM XLE
Technology 9.77% 0.0%
Industrials 10.14% 0.0%
Energy 7.12% 100.0%
Communication Services 5.91% 0.0%
Utilities 7.27% 0.0%
Healthcare 13.61% 0.0%
Consumer Defensive 14.13% 0.0%
Real Estate 0.02% 0.0%
Financial Services 22.05% 0.0%
Consumer Cyclical 5.57% 0.0%
Basic Materials 4.41% 0.0%

The Vanguard High Dividend Yield Index Fund ETF Shares (VYM) has the most exposure to the Financial Services sector at 22.05%. This is followed by Consumer Defensive and Healthcare at 14.13% and 13.61% respectively. Basic Materials (4.41%), Consumer Cyclical (5.57%), and Communication Services (5.91%) only make up 15.89% of the fund’s total assets.

VYM’s mid-section with moderate exposure is comprised of Energy, Utilities, Technology, Industrials, and Healthcare stocks at 7.12%, 7.27%, 9.77%, 10.14%, and 13.61%.

The Energy Select Sector SPDR Fund (XLE) has the most exposure to the Energy 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.

XLE’s mid-section with moderate exposure is comprised of Consumer Defensive, Healthcare, Utilities, Communication Services, and Industrials stocks at 0.0%, 0.0%, 0.0%, 0.0%, and 0.0%.

VYM is 22.05% more exposed to the Financial Services sector than XLE (22.05% vs 0.0%). VYM’s exposure to Consumer Defensive and Healthcare stocks is 14.13% higher and 13.61% higher respectively (14.13% vs. 0.0% and 13.61% vs. 0.0%). In total, Basic Materials, Consumer Cyclical, and Communication Services also make up 15.89% more of the fund’s holdings compared to XLE (15.89% vs. 0.00%).

Holdings

VYM - Holdings

VYM Holdings Weight
JPMorgan Chase & Co 3.53%
Johnson & Johnson 3.28%
The Home Depot Inc 2.59%
Procter & Gamble Co 2.48%
Bank of America Corp 2.35%
Exxon Mobil Corp 2.02%
Comcast Corp Class A 1.96%
Verizon Communications Inc 1.75%
Intel Corp 1.71%
Cisco Systems Inc 1.69%

VYM’s Top Holdings are JPMorgan Chase & Co, Johnson & Johnson, The Home Depot Inc, Procter & Gamble Co, and Bank of America Corp at 3.53%, 3.28%, 2.59%, 2.48%, and 2.35%.

Exxon Mobil Corp (2.02%), Comcast Corp Class A (1.96%), and Verizon Communications Inc (1.75%) have a slightly smaller but still significant weight. Intel Corp and Cisco Systems Inc are also represented in the VYM’s holdings at 1.71% and 1.69%.

XLE - Holdings

XLE Holdings Weight
Exxon Mobil Corp 23.7%
Chevron Corp 20.03%
ConocoPhillips 4.64%
EOG Resources Inc 4.46%
Schlumberger Ltd 4.43%
Marathon Petroleum Corp 4.17%
Pioneer Natural Resources Co 4.08%
Phillips 66 4.07%
Kinder Morgan Inc Class P 3.85%
Williams Companies Inc 3.5%

XLE’s Top Holdings are Exxon Mobil Corp, Chevron Corp, ConocoPhillips, EOG Resources Inc, and Schlumberger Ltd at 23.7%, 20.03%, 4.64%, 4.46%, and 4.43%.

Marathon Petroleum Corp (4.17%), Pioneer Natural Resources Co (4.08%), and Phillips 66 (4.07%) have a slightly smaller but still significant weight. Kinder Morgan Inc Class P and Williams Companies Inc are also represented in the XLE’s holdings at 3.85% and 3.5%.

Risk Analysis

VYM XLE
Mean Return 1.04 0.32
R-squared 88.88 61.84
Std. Deviation 12.69 27.52
Alpha -0.7 -11.98
Beta 0.88 1.54
Sharpe Ratio 0.93 0.12
Treynor Ratio 13.24 -0.4

The Vanguard High Dividend Yield Index Fund ETF Shares (VYM) has a Standard Deviation of 12.69 with a Alpha of -0.7 and a Treynor Ratio of 13.24. Its Mean Return is 1.04 while VYM’s R-squared is 88.88. Furthermore, the fund has a Beta of 0.88 and a Sharpe Ratio of 0.93.

The Energy Select Sector SPDR Fund (XLE) has a R-squared of 61.84 with a Mean Return of 0.32 and a Alpha of -11.98. Its Standard Deviation is 27.52 while XLE’s Treynor Ratio is -0.4. Furthermore, the fund has a Sharpe Ratio of 0.12 and a Beta of 1.54.

VYM’s Mean Return is 0.72 points higher than that of XLE and its R-squared is 27.04 points higher. With a Standard Deviation of 12.69, VYM is slightly less volatile than XLE. The Alpha and Beta of VYM are 11.28 points higher and 0.66 points lower than XLE’s Alpha and Beta.

Performance

Annual Returns

VYM vs. XLE - Annual Returns

Year VYM XLE
2020 1.14% -32.56%
2019 24.2% 11.87%
2018 -5.87% -18.1%
2017 16.42% -1.01%
2016 16.87% 27.95%
2015 0.33% -21.47%
2014 13.47% -8.61%
2013 30.26% 26.16%
2012 12.68% 5.17%
2011 10.5% 2.98%
2010 14.17% 21.7%

VYM had its best year in 2013 with an annual return of 30.26%. VYM’s worst year over the past decade yielded -5.87% and occurred in 2018. In most years the Vanguard High Dividend Yield Index Fund ETF Shares provided moderate returns such as in 2012, 2014, and 2010 where annual returns amounted to 12.68%, 13.47%, and 14.17% respectively.

The year 2016 was the strongest year for XLE, returning 27.95% on an annual basis. The poorest year for XLE in the last ten years was 2020, with a yield of -32.56%. Most years the Energy Select Sector SPDR Fund has given investors modest returns, such as in 2017, 2011, and 2012, when gains were -1.01%, 2.98%, and 5.17% respectively.

Portfolio Growth

VYM vs. XLE - Portfolio Growth

Fund Initial Balance Final Balance CAGR
VYM $10,000 $33,914 12.20%
XLE $10,000 $9,339 1.28%

A $10,000 investment in VYM would have resulted in a final balance of $33,914. This is a profit of $23,914 over 11 years and amounts to a compound annual growth rate (CAGR) of 12.20%.

With a $10,000 investment in XLE, the end total would have been $9,339. This equates to a $-661 profit over 11 years and a compound annual growth rate (CAGR) of 1.28%.

VYM’s CAGR is 10.92 percentage points higher than that of XLE and as a result, would have yielded $24,575 more on a $10,000 investment. Thus, VYM outperformed XLE by 10.92% annually.


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