Skip to content

XLF vs. VBR: What’s The Difference?

The Financial Select Sector SPDR Fund (XLF) and the Vanguard Small-Cap Value Index Fund ETF Shares (VBR) are both among the Top 100 ETFs. XLF is a SPDR State Street Global Advisors Financial fund and VBR is a Vanguard Small Value fund. So, what’s the difference between XLF and VBR? And which fund is better?

The expense ratio of XLF is 0.05 percentage points higher than VBR’s (0.12% vs. 0.07%). XLF also has a higher exposure to the financial services sector and a higher standard deviation. Overall, XLF has provided lower returns than VBR over the past ten years.

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

Introduction To Mutual Funds
Introduction To Mutual Funds
TIP: Keep track of all your investments with Personal Capital. I use this amazing tool to aggregate all investments in one place and make sure I'm on track to financial freedom. Oh, and did I mention it's free? Try it out here (link to Personal Capital).

Summary

XLFVBR
NameFinancial Select Sector SPDR FundVanguard Small-Cap Value Index Fund ETF Shares
CategoryFinancialSmall Value
IssuerSPDR State Street Global AdvisorsVanguard
AUM40.81B48.08B
Avg. Return12.17%12.28%
Div. Yield1.57%1.6%
Expense Ratio0.12%0.07%

The Financial Select Sector SPDR Fund (XLF) is a Financial fund that is issued by SPDR State Street Global Advisors. It currently has 40.81B total assets under management and has yielded an average annual return of 12.17% over the past 10 years. The fund has a dividend yield of 1.57% with an expense ratio of 0.12%.

The Vanguard Small-Cap Value Index Fund ETF Shares (VBR) is a Small Value fund that is issued by Vanguard. It currently has 48.08B total assets under management and has yielded an average annual return of 12.28% over the past 10 years. The fund has a dividend yield of 1.6% with an expense ratio of 0.07%.

XLF’s dividend yield is 0.03% lower than that of VBR (1.57% vs. 1.6%). Also, XLF yielded on average 0.12% less per year over the past decade (12.17% vs. 12.28%). The expense ratio of XLF is 0.05 percentage points higher than VBR’s (0.12% vs. 0.07%).

FYI: The best way I've found to invest in ETFs is through M1 Finance. It's free and you even get an instant line of credit! Have a look here (link to M1 Finance).

Fund Composition

Industry Exposure

XLF vs. VBR - Industry Exposure

XLFVBR
Technology0.0%8.39%
Industrials0.0%18.44%
Energy0.0%5.15%
Communication Services0.0%1.77%
Utilities0.0%3.65%
Healthcare0.0%7.16%
Consumer Defensive0.0%4.36%
Real Estate0.0%10.92%
Financial Services100.0%20.04%
Consumer Cyclical0.0%13.82%
Basic Materials0.0%6.31%

The Financial Select Sector SPDR Fund (XLF) has the most exposure to the Financial Services sector at 100.0%. This is followed by Technology and Industrials at 0.0% and 0.0% respectively. Consumer Cyclical (0.0%), Real Estate (0.0%), and Consumer Defensive (0.0%) only make up 0.00% of the fund’s total assets.

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

The Vanguard Small-Cap Value Index Fund ETF Shares (VBR) has the most exposure to the Financial Services sector at 20.04%. This is followed by Industrials and Consumer Cyclical at 18.44% and 13.82% respectively. Utilities (3.65%), Consumer Defensive (4.36%), and Energy (5.15%) only make up 13.16% of the fund’s total assets.

VBR’s mid-section with moderate exposure is comprised of Basic Materials, Healthcare, Technology, Real Estate, and Consumer Cyclical stocks at 6.31%, 7.16%, 8.39%, 10.92%, and 13.82%.

XLF is 79.96% more exposed to the Financial Services sector than VBR (100.0% vs 20.04%). XLF’s exposure to Technology and Industrials stocks is 8.39% lower and 18.44% lower respectively (0.0% vs. 8.39% and 0.0% vs. 18.44%). In total, Consumer Cyclical, Real Estate, and Consumer Defensive also make up 29.10% less of the fund’s holdings compared to VBR (0.00% vs. 29.10%).

Holdings

XLF - Holdings

XLF HoldingsWeight
Berkshire Hathaway Inc Class B12.83%
JPMorgan Chase & Co11.47%
Bank of America Corp7.57%
Wells Fargo & Co4.56%
Citigroup Inc3.56%
Morgan Stanley3.32%
Goldman Sachs Group Inc3.15%
BlackRock Inc3.02%
Charles Schwab Corp2.66%
American Express Co2.62%

XLF’s Top Holdings are Berkshire Hathaway Inc Class B, JPMorgan Chase & Co, Bank of America Corp, Wells Fargo & Co, and Citigroup Inc at 12.83%, 11.47%, 7.57%, 4.56%, and 3.56%.

Morgan Stanley (3.32%), Goldman Sachs Group Inc (3.15%), and BlackRock Inc (3.02%) have a slightly smaller but still significant weight. Charles Schwab Corp and American Express Co are also represented in the XLF’s holdings at 2.66% and 2.62%.

VBR - Holdings

VBR HoldingsWeight
Diamondback Energy Inc0.55%
VICI Properties Inc Ordinary Shares0.54%
IDEX Corp0.54%
Nuance Communications Inc0.5%
Molina Healthcare Inc0.48%
Signature Bank0.46%
Novavax Inc0.44%
Howmet Aerospace Inc0.44%
Apollo Global Management Inc Class A0.42%
Brown & Brown Inc0.41%

VBR’s Top Holdings are Diamondback Energy Inc, VICI Properties Inc Ordinary Shares, IDEX Corp, Nuance Communications Inc, and Molina Healthcare Inc at 0.55%, 0.54%, 0.54%, 0.5%, and 0.48%.

Signature Bank (0.46%), Novavax Inc (0.44%), and Howmet Aerospace Inc (0.44%) have a slightly smaller but still significant weight. Apollo Global Management Inc Class A and Brown & Brown Inc are also represented in the VBR’s holdings at 0.42% and 0.41%.

NOTE: The easiest way to add diversification to your portfolio is to invest in real estate through Fundrise. You can become private real estate investor without the burden of property management! Check it out here (link to Fundrise).

Risk Analysis

XLFVBR
Mean Return1.211.08
R-squared73.2682.2
Std. Deviation18.8618.37
Alpha2.63-5.09
Beta1.151.23
Sharpe Ratio0.740.67
Treynor Ratio11.259.15

The Financial Select Sector SPDR Fund (XLF) has a Beta of 1.15 with a Treynor Ratio of 11.25 and a Mean Return of 1.21. Its Alpha is 2.63 while XLF’s Sharpe Ratio is 0.74. Furthermore, the fund has a Standard Deviation of 18.86 and a R-squared of 73.26.

The Vanguard Small-Cap Value Index Fund ETF Shares (VBR) has a Beta of 1.23 with a Mean Return of 1.08 and a Standard Deviation of 18.37. Its R-squared is 82.2 while VBR’s Alpha is -5.09. Furthermore, the fund has a Sharpe Ratio of 0.67 and a Treynor Ratio of 9.15.

XLF’s Mean Return is 0.13 points higher than that of VBR and its R-squared is 8.94 points lower. With a Standard Deviation of 18.86, XLF is slightly more volatile than VBR. The Alpha and Beta of XLF are 7.72 points higher and 0.08 points lower than VBR’s Alpha and Beta.

FYI: Another great way to get exposure to the real estate sector is by investing in real estate debt. Groundfloor offers fantastic short-term, high-yield bonds that can add diversification to your portfolio!

Performance

Annual Returns

XLF vs. VBR - Annual Returns

YearXLFVBR
2020-1.68%5.82%
201931.88%22.76%
2018-13.09%-12.22%
201722.03%11.79%
201622.55%24.8%
2015-1.6%-4.67%
201415.02%10.55%
201335.37%36.57%
201228.53%18.78%
2011-17.16%-4.05%
201011.97%24.97%

XLF had its best year in 2013 with an annual return of 35.37%. XLF’s worst year over the past decade yielded -17.16% and occurred in 2011. In most years the Financial Select Sector SPDR Fund provided moderate returns such as in 2010, 2014, and 2017 where annual returns amounted to 11.97%, 15.02%, and 22.03% respectively.

The year 2013 was the strongest year for VBR, returning 36.57% on an annual basis. The poorest year for VBR in the last ten years was 2018, with a yield of -12.22%. Most years the Vanguard Small-Cap Value Index Fund ETF Shares has given investors modest returns, such as in 2014, 2017, and 2012, when gains were 10.55%, 11.79%, and 18.78% respectively.

Portfolio Growth

XLF vs. VBR - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
XLF$10,000$30,78212.17%
VBR$10,000$32,61112.28%

A $10,000 investment in XLF would have resulted in a final balance of $30,782. This is a profit of $20,782 over 11 years and amounts to a compound annual growth rate (CAGR) of 12.17%.

With a $10,000 investment in VBR, the end total would have been $32,611. This equates to a $22,611 profit over 11 years and a compound annual growth rate (CAGR) of 12.28%.

XLF’s CAGR is 0.12 percentage points lower than that of VBR and as a result, would have yielded $1,829 less on a $10,000 investment. Thus, XLF performed worse than VBR by 0.12% annually.


Current recommendations:

Over the past years, I have discovered several tools and products that have helped me tremendously on my path to financial freedom:

P.S.: The links below are affiliate links, which means I receive a small commission at no extra cost to you when you sign up for one of the services. Thank you for your support!

1)Personal Capital is simply the best tool out there to track your net worth and plan for financial freedom. Just their retirement planner alone has become an invaluable tool to keep myself on track financially. Try it out, it's free!

2) Take a look at M1 Finance, my favorite broker. I love how easy it is to invest and maintain my portfolio with them. I can set up automatic transfers, rebalance my portfolio with one click and even borrow up to 35% of my assets at super low interest rates!

3) Fundrise is by far the best way I've found to invest in Real Estate. You can diversify your portfolio by investing in their eREITs or even allocate capital to individual properties (without the hassle of managing tenants!).

4) Groundfloor is another great way to get exposure to the real estate sector by investing in short-term, high-yield real estate debt. Current returns are >10% and you can get started with just $10.

5) If you are interested in startup investing, check out Mainvest. I've started allocating a small amount of assets to invest in and support small businesses. Return targets are between 10-25% and you can start with just $100!

To see all of my most up-to-date recommendations, check out the Recommended Tools section.

Leave a Reply

Your email address will not be published.