XLF vs. VHT: What’s The Difference?

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

The expense ratio of XLF is 0.02 percentage points higher than VHT’s (0.12% vs. 0.1%). XLF also has a higher exposure to the financial services sector and a higher standard deviation. Overall, XLF has provided lower returns than VHT over the past ten years.

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

Summary

XLF VHT
Name Financial Select Sector SPDR Fund Vanguard Health Care Index Fund ETF Shares
Category Financial Health
Issuer SPDR State Street Global Advisors Vanguard
AUM 40.81B 17.94B
Avg. Return 12.17% 16.04%
Div. Yield 1.57% 1.15%
Expense Ratio 0.12% 0.1%

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 Health Care Index Fund ETF Shares (VHT) is a Health fund that is issued by Vanguard. It currently has 17.94B total assets under management and has yielded an average annual return of 16.04% over the past 10 years. The fund has a dividend yield of 1.15% with an expense ratio of 0.1%.

XLF’s dividend yield is 0.42% higher than that of VHT (1.57% vs. 1.15%). Also, XLF yielded on average 3.87% less per year over the past decade (12.17% vs. 16.04%). The expense ratio of XLF is 0.02 percentage points higher than VHT’s (0.12% vs. 0.1%).

Fund Composition

Industry Exposure

XLF vs. VHT - Industry Exposure

XLF VHT
Technology 0.0% 0.05%
Industrials 0.0% 0.05%
Energy 0.0% 0.0%
Communication Services 0.0% 0.0%
Utilities 0.0% 0.0%
Healthcare 0.0% 99.57%
Consumer Defensive 0.0% 0.0%
Real Estate 0.0% 0.0%
Financial Services 100.0% 0.02%
Consumer Cyclical 0.0% 0.0%
Basic Materials 0.0% 0.31%

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 Health Care Index Fund ETF Shares (VHT) has the most exposure to the Healthcare sector at 99.57%. This is followed by Basic Materials and Technology at 0.31% and 0.05% respectively. Real Estate (0.0%), Consumer Defensive (0.0%), and Utilities (0.0%) only make up 0.00% of the fund’s total assets.

VHT’s mid-section with moderate exposure is comprised of Communication Services, Energy, Financial Services, Industrials, and Technology stocks at 0.0%, 0.0%, 0.02%, 0.05%, and 0.05%.

XLF is 99.98% more exposed to the Financial Services sector than VHT (100.0% vs 0.02%). XLF’s exposure to Technology and Industrials stocks is 0.05% lower and 0.05% lower respectively (0.0% vs. 0.05% and 0.0% vs. 0.05%). In total, Consumer Cyclical, Real Estate, and Consumer Defensive also make up 0.00% less of the fund’s holdings compared to VHT (0.00% vs. 0.00%).

Holdings

XLF - Holdings

XLF Holdings Weight
Berkshire Hathaway Inc Class B 12.83%
JPMorgan Chase & Co 11.47%
Bank of America Corp 7.57%
Wells Fargo & Co 4.56%
Citigroup Inc 3.56%
Morgan Stanley 3.32%
Goldman Sachs Group Inc 3.15%
BlackRock Inc 3.02%
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%.

VHT - Holdings

VHT Holdings Weight
Johnson & Johnson 7.34%
UnitedHealth Group Inc 6.44%
Pfizer Inc 3.7%
Abbott Laboratories 3.48%
Thermo Fisher Scientific Inc 3.37%
AbbVie Inc 3.37%
Merck & Co Inc 3.33%
Eli Lilly and Co 3.17%
Danaher Corp 2.91%
Medtronic PLC 2.83%

VHT’s Top Holdings are Johnson & Johnson, UnitedHealth Group Inc, Pfizer Inc, Abbott Laboratories, and Thermo Fisher Scientific Inc at 7.34%, 6.44%, 3.7%, 3.48%, and 3.37%.

AbbVie Inc (3.37%), Merck & Co Inc (3.33%), and Eli Lilly and Co (3.17%) have a slightly smaller but still significant weight. Danaher Corp and Medtronic PLC are also represented in the VHT’s holdings at 2.91% and 2.83%.

Risk Analysis

XLF VHT
Mean Return 1.21 1.33
R-squared 73.26 59.86
Std. Deviation 18.86 13.58
Alpha 2.63 7.99
Beta 1.15 0.75
Sharpe Ratio 0.74 1.13
Treynor Ratio 11.25 20.74

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

The Vanguard Health Care Index Fund ETF Shares (VHT) has a Beta of 0.75 with a Standard Deviation of 13.58 and a Sharpe Ratio of 1.13. Its Alpha is 7.99 while VHT’s R-squared is 59.86. Furthermore, the fund has a Mean Return of 1.33 and a Treynor Ratio of 20.74.

XLF’s Mean Return is 0.12 points lower than that of VHT and its R-squared is 13.40 points higher. With a Standard Deviation of 18.86, XLF is slightly more volatile than VHT. The Alpha and Beta of XLF are 5.36 points lower and 0.40 points higher than VHT’s Alpha and Beta.

Performance

Annual Returns

XLF vs. VHT - Annual Returns

Year XLF VHT
2020 -1.68% 18.21%
2019 31.88% 21.97%
2018 -13.09% 5.55%
2017 22.03% 23.34%
2016 22.55% -3.33%
2015 -1.6% 7.22%
2014 15.02% 25.38%
2013 35.37% 42.67%
2012 28.53% 19.1%
2011 -17.16% 10.57%
2010 11.97% 5.75%

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 VHT, returning 42.67% on an annual basis. The poorest year for VHT in the last ten years was 2016, with a yield of -3.33%. Most years the Vanguard Health Care Index Fund ETF Shares has given investors modest returns, such as in 2011, 2020, and 2012, when gains were 10.57%, 18.21%, and 19.1% respectively.

Portfolio Growth

XLF vs. VHT - Portfolio Growth

Fund Initial Balance Final Balance CAGR
XLF $10,000 $30,782 12.17%
VHT $10,000 $48,464 16.04%

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 VHT, the end total would have been $48,464. This equates to a $38,464 profit over 11 years and a compound annual growth rate (CAGR) of 16.04%.

XLF’s CAGR is 3.87 percentage points lower than that of VHT and as a result, would have yielded $17,682 less on a $10,000 investment. Thus, XLF performed worse than VHT by 3.87% annually.


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