VYM vs. XLI: What’s The Difference?

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

The expense ratio of VYM is 0.06 percentage points lower than XLI’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 lower returns than XLI over the past ten years.

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

Summary

VYM XLI
Name Vanguard High Dividend Yield Index Fund ETF Shares Industrial Select Sector SPDR Fund
Category Large Value Industrials
Issuer Vanguard SPDR State Street Global Advisors
AUM 48.5B 19.33B
Avg. Return 12.20% 14.44%
Div. Yield 2.79% 1.25%
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 Industrial Select Sector SPDR Fund (XLI) is a Industrials fund that is issued by SPDR State Street Global Advisors. It currently has 19.33B total assets under management and has yielded an average annual return of 14.44% over the past 10 years. The fund has a dividend yield of 1.25% with an expense ratio of 0.12%.

VYM’s dividend yield is 1.54% higher than that of XLI (2.79% vs. 1.25%). Also, VYM yielded on average 2.25% less per year over the past decade (12.20% vs. 14.44%). The expense ratio of VYM is 0.06 percentage points lower than XLI’s (0.06% vs. 0.12%).

Fund Composition

Industry Exposure

VYM vs. XLI - Industry Exposure

VYM XLI
Technology 9.77% 1.82%
Industrials 10.14% 97.49%
Energy 7.12% 0.0%
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% 0.69%
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 Industrial Select Sector SPDR Fund (XLI) has the most exposure to the Industrials sector at 97.49%. This is followed by Technology and Consumer Cyclical at 1.82% and 0.69% respectively. Financial Services (0.0%), Real Estate (0.0%), and Consumer Defensive (0.0%) only make up 0.00% of the fund’s total assets.

XLI’s mid-section with moderate exposure is comprised of Healthcare, Utilities, Communication Services, Energy, and Consumer Cyclical stocks at 0.0%, 0.0%, 0.0%, 0.0%, and 0.69%.

VYM is 22.05% more exposed to the Financial Services sector than XLI (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 15.20% more of the fund’s holdings compared to XLI (15.89% vs. 0.69%).

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%.

XLI - Holdings

XLI Holdings Weight
Honeywell International Inc 4.9%
United Parcel Service Inc Class B 4.84%
Union Pacific Corp 4.7%
Boeing Co 4.24%
Raytheon Technologies Corp 4.16%
Caterpillar Inc 3.84%
General Electric Co 3.8%
3M Co 3.7%
Deere & Co 3.54%
Lockheed Martin Corp 2.98%

XLI’s Top Holdings are Honeywell International Inc, United Parcel Service Inc Class B, Union Pacific Corp, Boeing Co, and Raytheon Technologies Corp at 4.9%, 4.84%, 4.7%, 4.24%, and 4.16%.

Caterpillar Inc (3.84%), General Electric Co (3.8%), and 3M Co (3.7%) have a slightly smaller but still significant weight. Deere & Co and Lockheed Martin Corp are also represented in the XLI’s holdings at 3.54% and 2.98%.

Risk Analysis

VYM XLI
Mean Return 1.04 1.14
R-squared 88.88 78.97
Std. Deviation 12.69 17.13
Alpha -0.7 2.38
Beta 0.88 1.08
Sharpe Ratio 0.93 0.76
Treynor Ratio 13.24 11.34

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

The Industrial Select Sector SPDR Fund (XLI) has a Treynor Ratio of 11.34 with a R-squared of 78.97 and a Beta of 1.08. Its Mean Return is 1.14 while XLI’s Sharpe Ratio is 0.76. Furthermore, the fund has a Alpha of 2.38 and a Standard Deviation of 17.13.

VYM’s Mean Return is 0.10 points lower than that of XLI and its R-squared is 9.91 points higher. With a Standard Deviation of 12.69, VYM is slightly less volatile than XLI. The Alpha and Beta of VYM are 3.08 points lower and 0.20 points lower than XLI’s Alpha and Beta.

Performance

Annual Returns

VYM vs. XLI - Annual Returns

Year VYM XLI
2020 1.14% 11.0%
2019 24.2% 29.11%
2018 -5.87% -13.1%
2017 16.42% 23.85%
2016 16.87% 19.93%
2015 0.33% -4.27%
2014 13.47% 10.44%
2013 30.26% 40.44%
2012 12.68% 14.86%
2011 10.5% -1.01%
2010 14.17% 27.62%

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 2013 was the strongest year for XLI, returning 40.44% on an annual basis. The poorest year for XLI in the last ten years was 2018, with a yield of -13.1%. Most years the Industrial Select Sector SPDR Fund has given investors modest returns, such as in 2020, 2012, and 2016, when gains were 11.0%, 14.86%, and 19.93% respectively.

Portfolio Growth

VYM vs. XLI - Portfolio Growth

Fund Initial Balance Final Balance CAGR
VYM $10,000 $33,914 12.20%
XLI $10,000 $39,853 14.44%

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 XLI, the end total would have been $39,853. This equates to a $29,853 profit over 11 years and a compound annual growth rate (CAGR) of 14.44%.

VYM’s CAGR is 2.25 percentage points lower than that of XLI and as a result, would have yielded $5,939 less on a $10,000 investment. Thus, VYM performed worse than XLI by 2.25% annually.


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