The Energy Select Sector SPDR Fund (XLE) and the Vanguard Mortgage-Backed Securities Index Fund ETF Shares (VMBS) are both among the Top 100 ETFs. XLE is a SPDR State Street Global Advisors Equity Energy fund and VMBS is a Vanguard Intermediate Government fund. So, what’s the difference between XLE and VMBS? And which fund is better?
The expense ratio of XLE is 0.07 percentage points higher than VMBS’s (0.12% vs. 0.05%). XLE also has a high exposure to the energy sector while VMBS is mostly comprised of AAA bonds. Overall, XLE has provided lower returns than VMBS over the past 10 years.
In this article, we’ll compare XLE vs. VMBS. We’ll look at fund composition and portfolio growth, as well as at their annual returns and industry exposure. Moreover, I’ll also discuss XLE’s and VMBS’s holdings, risk metrics, and performance and examine how these affect their overall returns.
|Name||Energy Select Sector SPDR Fund||Vanguard Mortgage-Backed Securities Index Fund ETF Shares|
|Category||Equity Energy||Intermediate Government|
|Issuer||SPDR State Street Global Advisors||Vanguard|
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%.
The Vanguard Mortgage-Backed Securities Index Fund ETF Shares (VMBS) is a Intermediate Government fund that is issued by Vanguard. It currently has 16.61B total assets under management and has yielded an average annual return of 2.89% over the past 10 years. The fund has a dividend yield of 1.23% with an expense ratio of 0.05%.
XLE’s dividend yield is 2.69% higher than that of VMBS (3.92% vs. 1.23%). Also, XLE yielded on average 1.61% less per year over the past decade (1.28% vs. 2.89%). The expense ratio of XLE is 0.07 percentage points higher than VMBS’s (0.12% vs. 0.05%).
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|Exxon Mobil Corp||23.7%|
|EOG Resources Inc||4.46%|
|Marathon Petroleum Corp||4.17%|
|Pioneer Natural Resources Co||4.08%|
|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%.
|VMBS Bond Sectors||Weight|
VMBS’s Top Bond Sectors are ratings of AAA, Below B, B, BB, and BBB at 100.01%, 0.0%, 0.0%, 0.0%, and 0.0%. The fund is less weighted towards A (0.0%), AA (0.0%), and US Government (0.0%) rated bonds.
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The Energy Select Sector SPDR Fund (XLE) has a Standard Deviation of 27.52 with a Beta of 1.54 and a Sharpe Ratio of 0.12. Its Mean Return is 0.32 while XLE’s Treynor Ratio is -0.4. Furthermore, the fund has a Alpha of -11.98 and a R-squared of 61.84.
The Vanguard Mortgage-Backed Securities Index Fund ETF Shares (VMBS) has a Beta of 0.54 with a Alpha of 0.37 and a Mean Return of 0.21. Its R-squared is 65.78 while VMBS’s Sharpe Ratio is 0.94. Furthermore, the fund has a Treynor Ratio of 3.47 and a Standard Deviation of 2.02.
XLE’s Mean Return is 0.11 points higher than that of VMBS and its R-squared is 3.94 points lower. With a Standard Deviation of 27.52, XLE is slightly more volatile than VMBS. The Alpha and Beta of XLE are 12.35 points lower and 1.00 points higher than VMBS’s Alpha and Beta.
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XLE had its best year in 2016 with an annual return of 27.95%. XLE’s worst year over the past decade yielded -32.56% and occurred in 2020. In most years the Energy Select Sector SPDR Fund provided moderate returns such as in 2017, 2011, and 2012 where annual returns amounted to -1.01%, 2.98%, and 5.17% respectively.
The year 2019 was the strongest year for VMBS, returning 6.17% on an annual basis. The poorest year for VMBS in the last ten years was 2013, with a yield of -1.28%. Most years the Vanguard Mortgage-Backed Securities Index Fund ETF Shares has given investors modest returns, such as in 2017, 2012, and 2020, when gains were 2.37%, 2.47%, and 3.77% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in XLE would have resulted in a final balance of $7,674. This is a profit of $-2,326 over 10 years and amounts to a compound annual growth rate (CAGR) of 1.28%.
With a $10,000 investment in VMBS, the end total would have been $13,265. This equates to a $3,265 profit over 10 years and a compound annual growth rate (CAGR) of 2.89%.
XLE’s CAGR is 1.61 percentage points lower than that of VMBS and as a result, would have yielded $5,591 less on a $10,000 investment. Thus, XLE performed worse than VMBS by 1.61% annually.
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