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VYM vs. XLV: What’s The Difference?

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

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

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

Introduction To Mutual Funds
Introduction To Mutual Funds
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Summary

VYMXLV
NameVanguard High Dividend Yield Index Fund ETF SharesHealth Care Select Sector SPDR Fund
CategoryLarge ValueHealth
IssuerVanguardSPDR State Street Global Advisors
AUM48.5B27.88B
Avg. Return12.20%15.02%
Div. Yield2.79%1.4%
Expense Ratio0.06%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 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%.

VYM’s dividend yield is 1.39% higher than that of XLV (2.79% vs. 1.4%). Also, VYM yielded on average 2.83% less per year over the past decade (12.20% vs. 15.02%). The expense ratio of VYM is 0.06 percentage points lower than XLV’s (0.06% vs. 0.12%).

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Fund Composition

Industry Exposure

VYM vs. XLV - Industry Exposure

VYMXLV
Technology9.77%0.0%
Industrials10.14%0.0%
Energy7.12%0.0%
Communication Services5.91%0.0%
Utilities7.27%0.0%
Healthcare13.61%100.0%
Consumer Defensive14.13%0.0%
Real Estate0.02%0.0%
Financial Services22.05%0.0%
Consumer Cyclical5.57%0.0%
Basic Materials4.41%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 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%.

VYM is 22.05% more exposed to the Financial Services sector than XLV (22.05% vs 0.0%). VYM’s exposure to Consumer Defensive and Healthcare stocks is 14.13% higher and 86.39% lower respectively (14.13% vs. 0.0% and 13.61% vs. 100.0%). In total, Basic Materials, Consumer Cyclical, and Communication Services also make up 15.89% more of the fund’s holdings compared to XLV (15.89% vs. 0.00%).

Holdings

VYM - Holdings

VYM HoldingsWeight
JPMorgan Chase & Co3.53%
Johnson & Johnson3.28%
The Home Depot Inc2.59%
Procter & Gamble Co2.48%
Bank of America Corp2.35%
Exxon Mobil Corp2.02%
Comcast Corp Class A1.96%
Verizon Communications Inc1.75%
Intel Corp1.71%
Cisco Systems Inc1.69%

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%.

XLV - Holdings

XLV HoldingsWeight
Johnson & Johnson9.19%
UnitedHealth Group Inc8.01%
Pfizer Inc4.64%
Abbott Laboratories4.36%
AbbVie Inc4.21%
Thermo Fisher Scientific Inc4.2%
Merck & Co Inc4.17%
Eli Lilly and Co3.87%
Danaher Corp3.61%
Medtronic PLC3.54%

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%.

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Risk Analysis

VYMXLV
Mean Return1.041.27
R-squared88.8858.19
Std. Deviation12.6912.94
Alpha-0.77.75
Beta0.880.7
Sharpe Ratio0.931.13
Treynor Ratio13.2421.1

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

The Health Care Select Sector SPDR Fund (XLV) has a Alpha of 7.75 with a Mean Return of 1.27 and a Treynor Ratio of 21.1. Its Standard Deviation is 12.94 while XLV’s Beta is 0.7. Furthermore, the fund has a R-squared of 58.19 and a Sharpe Ratio of 1.13.

VYM’s Mean Return is 0.23 points lower than that of XLV and its R-squared is 30.69 points higher. With a Standard Deviation of 12.69, VYM is slightly less volatile than XLV. The Alpha and Beta of VYM are 8.45 points lower and 0.18 points higher than XLV’s Alpha and Beta.

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Performance

Annual Returns

VYM vs. XLV - Annual Returns

YearVYMXLV
20201.14%13.33%
201924.2%20.63%
2018-5.87%6.3%
201716.42%21.7%
201616.87%-2.83%
20150.33%6.82%
201413.47%25.17%
201330.26%41.24%
201212.68%17.56%
201110.5%12.44%
201014.17%2.91%

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 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

VYM vs. XLV - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
VYM$10,000$33,91412.20%
XLV$10,000$44,14715.02%

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 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%.

VYM’s CAGR is 2.83 percentage points lower than that of XLV and as a result, would have yielded $10,233 less on a $10,000 investment. Thus, VYM performed worse than XLV by 2.83% annually.


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