The Financial Select Sector SPDR Fund (XLF) and the Vanguard FTSE Europe Index Fund ETF Shares (VGK) are both among the Top 100 ETFs. XLF is a SPDR State Street Global Advisors Financial fund and VGK is a Vanguard Europe Stock fund. So, what’s the difference between XLF and VGK? And which fund is better?
The expense ratio of XLF is 0.04 percentage points higher than VGK’s (0.12% vs. 0.08%). XLF also has a higher exposure to the financial services sector and a higher standard deviation. Overall, XLF has provided higher returns than VGK over the past ten years.
In this article, we’ll compare XLF vs. VGK. We’ll look at portfolio growth and industry exposure, as well as at their fund composition and risk metrics. Moreover, I’ll also discuss XLF’s and VGK’s annual returns, holdings, and performance and examine how these affect their overall returns.
|Name||Financial Select Sector SPDR Fund||Vanguard FTSE Europe 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 FTSE Europe Index Fund ETF Shares (VGK) is a Europe Stock fund that is issued by Vanguard. It currently has 25.7B total assets under management and has yielded an average annual return of 6.68% over the past 10 years. The fund has a dividend yield of 2.52% with an expense ratio of 0.08%.
XLF’s dividend yield is 0.95% lower than that of VGK (1.57% vs. 2.52%). Also, XLF yielded on average 5.49% more per year over the past decade (12.17% vs. 6.68%). The expense ratio of XLF is 0.04 percentage points higher than VGK’s (0.12% vs. 0.08%).
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 FTSE Europe Index Fund ETF Shares (VGK) has the most exposure to the Financial Services sector at 15.85%. This is followed by Industrials and Healthcare at 15.58% and 13.76% respectively. Utilities (3.89%), Energy (4.3%), and Communication Services (5.09%) only make up 13.28% of the fund’s total assets.
VGK’s mid-section with moderate exposure is comprised of Basic Materials, Technology, Consumer Defensive, Consumer Cyclical, and Healthcare stocks at 7.67%, 8.3%, 11.39%, 11.6%, and 13.76%.
XLF is 84.15% more exposed to the Financial Services sector than VGK (100.0% vs 15.85%). XLF’s exposure to Technology and Industrials stocks is 8.30% lower and 15.58% lower respectively (0.0% vs. 8.3% and 0.0% vs. 15.58%). In total, Consumer Cyclical, Real Estate, and Consumer Defensive also make up 25.56% less of the fund’s holdings compared to VGK (0.00% vs. 25.56%).
|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%.
|ASML Holding NV||2.2%|
|Roche Holding AG||2.13%|
|LVMH Moet Hennessy Louis Vuitton SE||1.58%|
|Novo Nordisk A/S B||1.09%|
VGK’s Top Holdings are Nestle SA, ASML Holding NV, Roche Holding AG, LVMH Moet Hennessy Louis Vuitton SE, and Novartis AG at 2.82%, 2.2%, 2.13%, 1.58%, and 1.55%.
AstraZeneca PLC (1.27%), SAP SE (1.25%), and Unilever PLC (1.23%) have a slightly smaller but still significant weight. Novo Nordisk A/S B and Siemens AG are also represented in the VGK’s holdings at 1.09% and 0.96%.
The Financial Select Sector SPDR Fund (XLF) has a R-squared of 73.26 with a Sharpe Ratio of 0.74 and a Beta of 1.15. Its Treynor Ratio is 11.25 while XLF’s Mean Return is 1.21. Furthermore, the fund has a Alpha of 2.63 and a Standard Deviation of 18.86.
The Vanguard FTSE Europe Index Fund ETF Shares (VGK) has a Sharpe Ratio of 0.4 with a Alpha of 0.45 and a R-squared of 92.76. Its Mean Return is 0.61 while VGK’s Treynor Ratio is 5.12. Furthermore, the fund has a Standard Deviation of 16.65 and a Beta of 1.06.
XLF’s Mean Return is 0.60 points higher than that of VGK and its R-squared is 19.50 points lower. With a Standard Deviation of 18.86, XLF is slightly more volatile than VGK. The Alpha and Beta of XLF are 2.18 points higher and 0.09 points higher than VGK’s Alpha and Beta.
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 2017 was the strongest year for VGK, returning 27.06% on an annual basis. The poorest year for VGK in the last ten years was 2018, with a yield of -14.79%. Most years the Vanguard FTSE Europe Index Fund ETF Shares has given investors modest returns, such as in 2016, 2010, and 2020, when gains were -0.59%, 5.01%, and 6.5% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
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 VGK, the end total would have been $18,350. This equates to a $8,350 profit over 11 years and a compound annual growth rate (CAGR) of 6.68%.
XLF’s CAGR is 5.49 percentage points higher than that of VGK and as a result, would have yielded $12,432 more on a $10,000 investment. Thus, XLF outperformed VGK by 5.49% annually.
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.