The Financial Select Sector SPDR Fund (XLF) and the Vanguard Short-Term Corporate Bond Index Fund ETF Shares (VCSH) are both among the Top 100 ETFs. XLF is a SPDR State Street Global Advisors Financial fund and VCSH is a Vanguard Short-Term Bond fund. So, what’s the difference between XLF and VCSH? And which fund is better?
The expense ratio of XLF is 0.07 percentage points higher than VCSH’s (0.12% vs. 0.05%). XLF also has a high exposure to the financial services sector while VCSH is mostly comprised of BBB bonds. Overall, XLF has provided higher returns than VCSH over the past ten years.
In this article, we’ll compare XLF vs. VCSH. We’ll look at annual returns and performance, as well as at their portfolio growth and risk metrics. Moreover, I’ll also discuss XLF’s and VCSH’s fund composition, industry exposure, and holdings and examine how these affect their overall returns.
|Name||Financial Select Sector SPDR Fund||Vanguard Short-Term Corporate Bond Index Fund ETF Shares|
|Issuer||SPDR State Street Global Advisors||Vanguard|
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 Short-Term Corporate Bond Index Fund ETF Shares (VCSH) is a Short-Term Bond fund that is issued by Vanguard. It currently has 47.88B total assets under management and has yielded an average annual return of 3.12% over the past 10 years. The fund has a dividend yield of 1.89% with an expense ratio of 0.05%.
XLF’s dividend yield is 0.32% lower than that of VCSH (1.57% vs. 1.89%). Also, XLF yielded on average 9.05% more per year over the past decade (12.17% vs. 3.12%). The expense ratio of XLF is 0.07 percentage points higher than VCSH’s (0.12% vs. 0.05%).
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|Berkshire Hathaway Inc Class B||12.83%|
|JPMorgan Chase & Co||11.47%|
|Bank of America Corp||7.57%|
|Wells Fargo & Co||4.56%|
|Goldman Sachs Group Inc||3.15%|
|Charles Schwab Corp||2.66%|
|American Express Co||2.62%|
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%.
|VCSH Bond Sectors||Weight|
VCSH’s Top Bond Sectors are ratings of BBB, A, AA, AAA, and Below B at 47.49%, 43.06%, 8.45%, 0.95%, and 0.03%. The fund is less weighted towards Others (0.02%), B (0.0%), and BB (0.0%) rated bonds.
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The Financial Select Sector SPDR Fund (XLF) has a Sharpe Ratio of 0.74 with a Mean Return of 1.21 and a Beta of 1.15. Its Standard Deviation is 18.86 while XLF’s R-squared is 73.26. Furthermore, the fund has a Alpha of 2.63 and a Treynor Ratio of 11.25.
The Vanguard Short-Term Corporate Bond Index Fund ETF Shares (VCSH) has a Beta of 0.48 with a Treynor Ratio of 4.75 and a Alpha of 0.93. Its Sharpe Ratio is 0.97 while VCSH’s Standard Deviation is 2.34. Furthermore, the fund has a Mean Return of 0.24 and a R-squared of 37.53.
XLF’s Mean Return is 0.97 points higher than that of VCSH and its R-squared is 35.73 points higher. With a Standard Deviation of 18.86, XLF is slightly more volatile than VCSH. The Alpha and Beta of XLF are 1.70 points higher and 0.67 points higher than VCSH’s Alpha and Beta.
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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 2019 was the strongest year for VCSH, returning 6.85% on an annual basis. The poorest year for VCSH in the last ten years was 2018, with a yield of 0.91%. Most years the Vanguard Short-Term Corporate Bond Index Fund ETF Shares has given investors modest returns, such as in 2017, 2016, and 2011, when gains were 2.45%, 2.63%, and 2.94% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in XLF would have resulted in a final balance of $27,491. This is a profit of $17,491 over 10 years and amounts to a compound annual growth rate (CAGR) of 12.17%.
With a $10,000 investment in VCSH, the end total would have been $13,569. This equates to a $3,569 profit over 10 years and a compound annual growth rate (CAGR) of 3.12%.
XLF’s CAGR is 9.05 percentage points higher than that of VCSH and as a result, would have yielded $13,922 more on a $10,000 investment. Thus, XLF outperformed VCSH by 9.05% annually.
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