The Vanguard High Dividend Yield Index Fund ETF Shares (VYM) and the Consumer Discretionary Select Sector SPDR Fund (XLY) are both among the Top 100 ETFs. VYM is a Vanguard Large Value fund and XLY is a SPDR State Street Global Advisors Consumer Cyclical fund. So, what’s the difference between VYM and XLY? And which fund is better?
The expense ratio of VYM is 0.06 percentage points lower than XLY’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 XLY over the past ten years.
In this article, we’ll compare VYM vs. XLY. We’ll look at portfolio growth and industry exposure, as well as at their performance and holdings. Moreover, I’ll also discuss VYM’s and XLY’s fund composition, risk metrics, and annual returns and examine how these affect their overall returns.
|Name||Vanguard High Dividend Yield Index Fund ETF Shares||Consumer Discretionary Select Sector SPDR Fund|
|Category||Large Value||Consumer Cyclical|
|Issuer||Vanguard||SPDR State Street Global Advisors|
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 Consumer Discretionary Select Sector SPDR Fund (XLY) is a Consumer Cyclical fund that is issued by SPDR State Street Global Advisors. It currently has 20.21B total assets under management and has yielded an average annual return of 18.86% over the past 10 years. The fund has a dividend yield of 0.63% with an expense ratio of 0.12%.
VYM’s dividend yield is 2.16% higher than that of XLY (2.79% vs. 0.63%). Also, VYM yielded on average 6.67% less per year over the past decade (12.20% vs. 18.86%). The expense ratio of VYM is 0.06 percentage points lower than XLY’s (0.06% vs. 0.12%).
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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 Consumer Discretionary Select Sector SPDR Fund (XLY) has the most exposure to the Consumer Cyclical sector at 94.1%. This is followed by Consumer Defensive and Technology at 5.34% and 0.57% respectively. Financial Services (0.0%), Real Estate (0.0%), and Healthcare (0.0%) only make up 0.00% of the fund’s total assets.
XLY’s mid-section with moderate exposure is comprised of Utilities, Communication Services, Energy, Industrials, and Technology stocks at 0.0%, 0.0%, 0.0%, 0.0%, and 0.57%.
VYM is 22.05% more exposed to the Financial Services sector than XLY (22.05% vs 0.0%). VYM’s exposure to Consumer Defensive and Healthcare stocks is 8.79% higher and 13.61% higher respectively (14.13% vs. 5.34% and 13.61% vs. 0.0%). In total, Basic Materials, Consumer Cyclical, and Communication Services also make up 78.21% less of the fund’s holdings compared to XLY (15.89% vs. 94.10%).
|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%|
|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%.
|The Home Depot Inc||8.74%|
|Nike Inc B||4.45%|
|Lowe’s Companies Inc||3.58%|
|Booking Holdings Inc||2.35%|
|TJX Companies Inc||2.12%|
XLY’s Top Holdings are Amazon.com Inc, Tesla Inc, The Home Depot Inc, McDonald’s Corp, and Nike Inc B at 22.9%, 13.5%, 8.74%, 4.5%, and 4.45%.
Lowe’s Companies Inc (3.58%), Starbucks Corp (3.44%), and Target Corp (3.12%) have a slightly smaller but still significant weight. Booking Holdings Inc and TJX Companies Inc are also represented in the XLY’s holdings at 2.35% and 2.12%.
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The Vanguard High Dividend Yield Index Fund ETF Shares (VYM) has a Mean Return of 1.04 with a Treynor Ratio of 13.24 and a Beta of 0.88. Its R-squared is 88.88 while VYM’s Sharpe Ratio is 0.93. Furthermore, the fund has a Standard Deviation of 12.69 and a Alpha of -0.7.
The Consumer Discretionary Select Sector SPDR Fund (XLY) has a Mean Return of 1.47 with a Standard Deviation of 15.97 and a Alpha of 6.96. Its Treynor Ratio is 16.69 while XLY’s Beta is 1.02. Furthermore, the fund has a R-squared of 80.84 and a Sharpe Ratio of 1.06.
VYM’s Mean Return is 0.43 points lower than that of XLY and its R-squared is 8.04 points higher. With a Standard Deviation of 12.69, VYM is slightly less volatile than XLY. The Alpha and Beta of VYM are 7.66 points lower and 0.14 points lower than XLY’s Alpha and Beta.
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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 XLY, returning 42.74% on an annual basis. The poorest year for XLY in the last ten years was 2018, with a yield of 1.66%. Most years the Consumer Discretionary Select Sector SPDR Fund has given investors modest returns, such as in 2015, 2017, and 2012, when gains were 9.93%, 22.77%, and 23.6% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
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 XLY, the end total would have been $63,066. This equates to a $53,066 profit over 11 years and a compound annual growth rate (CAGR) of 18.86%.
VYM’s CAGR is 6.67 percentage points lower than that of XLY and as a result, would have yielded $29,152 less on a $10,000 investment. Thus, VYM performed worse than XLY by 6.67% annually.
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