The Financial Select Sector SPDR Fund (XLF) and the Vanguard Large-Cap Index Fund ETF Shares (VV) are both among the Top 100 ETFs. XLF is a SPDR State Street Global Advisors Financial fund and VV is a Vanguard Large Blend fund. So, what’s the difference between XLF and VV? And which fund is better?
The expense ratio of XLF is 0.08 percentage points higher than VV’s (0.12% vs. 0.04%). XLF also has a higher exposure to the financial services sector and a higher standard deviation. Overall, XLF has provided lower returns than VV over the past ten years.
In this article, we’ll compare XLF vs. VV. We’ll look at performance and annual returns, as well as at their risk metrics and holdings. Moreover, I’ll also discuss XLF’s and VV’s industry exposure, portfolio growth, and fund composition and examine how these affect their overall returns.
Summary
| XLF | VV | |
| Name | Financial Select Sector SPDR Fund | Vanguard Large-Cap Index Fund ETF Shares |
| Category | Financial | Large Blend |
| Issuer | SPDR State Street Global Advisors | Vanguard |
| AUM | 40.81B | 37.65B |
| Avg. Return | 12.17% | 14.75% |
| Div. Yield | 1.57% | 1.26% |
| Expense Ratio | 0.12% | 0.04% |
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 Large-Cap Index Fund ETF Shares (VV) is a Large Blend fund that is issued by Vanguard. It currently has 37.65B total assets under management and has yielded an average annual return of 14.75% over the past 10 years. The fund has a dividend yield of 1.26% with an expense ratio of 0.04%.
XLF’s dividend yield is 0.31% higher than that of VV (1.57% vs. 1.26%). Also, XLF yielded on average 2.58% less per year over the past decade (12.17% vs. 14.75%). The expense ratio of XLF is 0.08 percentage points higher than VV’s (0.12% vs. 0.04%).
Fund Composition
Industry Exposure
| XLF | VV | |
| Technology | 0.0% | 25.38% |
| Industrials | 0.0% | 8.39% |
| Energy | 0.0% | 2.62% |
| Communication Services | 0.0% | 11.68% |
| Utilities | 0.0% | 2.35% |
| Healthcare | 0.0% | 13.22% |
| Consumer Defensive | 0.0% | 6.06% |
| Real Estate | 0.0% | 2.7% |
| Financial Services | 100.0% | 13.82% |
| Consumer Cyclical | 0.0% | 11.65% |
| Basic Materials | 0.0% | 2.13% |
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 Large-Cap Index Fund ETF Shares (VV) has the most exposure to the Technology sector at 25.38%. This is followed by Financial Services and Healthcare at 13.82% and 13.22% respectively. Utilities (2.35%), Energy (2.62%), and Real Estate (2.7%) only make up 7.67% of the fund’s total assets.
VV’s mid-section with moderate exposure is comprised of Consumer Defensive, Industrials, Consumer Cyclical, Communication Services, and Healthcare stocks at 6.06%, 8.39%, 11.65%, 11.68%, and 13.22%.
XLF is 86.18% more exposed to the Financial Services sector than VV (100.0% vs 13.82%). XLF’s exposure to Technology and Industrials stocks is 25.38% lower and 8.39% lower respectively (0.0% vs. 25.38% and 0.0% vs. 8.39%). In total, Consumer Cyclical, Real Estate, and Consumer Defensive also make up 20.41% less of the fund’s holdings compared to VV (0.00% vs. 20.41%).
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%.
| VV Holdings | Weight |
| Apple Inc | 5.7% |
| Microsoft Corp | 5.35% |
| Amazon.com Inc | 3.87% |
| Facebook Inc Class A | 2.19% |
| Alphabet Inc Class A | 1.93% |
| Alphabet Inc Class C | 1.81% |
| Tesla Inc | 1.37% |
| Berkshire Hathaway Inc Class B | 1.3% |
| NVIDIA Corp | 1.24% |
| JPMorgan Chase & Co | 1.24% |
VV’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc Class A, and Alphabet Inc Class A at 5.7%, 5.35%, 3.87%, 2.19%, and 1.93%.
Alphabet Inc Class C (1.81%), Tesla Inc (1.37%), and Berkshire Hathaway Inc Class B (1.3%) have a slightly smaller but still significant weight. NVIDIA Corp and JPMorgan Chase & Co are also represented in the VV’s holdings at 1.24% and 1.24%.
Risk Analysis
| XLF | VV | |
| Mean Return | 1.21 | 1.24 |
| R-squared | 73.26 | 99.86 |
| Std. Deviation | 18.86 | 13.75 |
| Alpha | 2.63 | -0.08 |
| Beta | 1.15 | 1.01 |
| Sharpe Ratio | 0.74 | 1.04 |
| Treynor Ratio | 11.25 | 14.14 |
The Financial Select Sector SPDR Fund (XLF) has a Sharpe Ratio of 0.74 with a Standard Deviation of 18.86 and a Mean Return of 1.21. Its R-squared is 73.26 while XLF’s Beta is 1.15. Furthermore, the fund has a Treynor Ratio of 11.25 and a Alpha of 2.63.
The Vanguard Large-Cap Index Fund ETF Shares (VV) has a Beta of 1.01 with a Alpha of -0.08 and a Mean Return of 1.24. Its Treynor Ratio is 14.14 while VV’s Sharpe Ratio is 1.04. Furthermore, the fund has a Standard Deviation of 13.75 and a R-squared of 99.86.
XLF’s Mean Return is 0.03 points lower than that of VV and its R-squared is 26.60 points lower. With a Standard Deviation of 18.86, XLF is slightly more volatile than VV. The Alpha and Beta of XLF are 2.71 points higher and 0.14 points higher than VV’s Alpha and Beta.
Performance
Annual Returns
| Year | XLF | VV |
| 2020 | -1.68% | 20.99% |
| 2019 | 31.88% | 31.39% |
| 2018 | -13.09% | -4.44% |
| 2017 | 22.03% | 22.03% |
| 2016 | 22.55% | 11.65% |
| 2015 | -1.6% | 1.07% |
| 2014 | 15.02% | 13.39% |
| 2013 | 35.37% | 32.65% |
| 2012 | 28.53% | 16.09% |
| 2011 | -17.16% | 1.58% |
| 2010 | 11.97% | 15.81% |
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 VV, returning 32.65% on an annual basis. The poorest year for VV in the last ten years was 2018, with a yield of -4.44%. Most years the Vanguard Large-Cap Index Fund ETF Shares has given investors modest returns, such as in 2014, 2010, and 2012, when gains were 13.39%, 15.81%, and 16.09% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| XLF | $10,000 | $30,782 | 12.17% |
| VV | $10,000 | $42,970 | 14.75% |
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 VV, the end total would have been $42,970. This equates to a $32,970 profit over 11 years and a compound annual growth rate (CAGR) of 14.75%.
XLF’s CAGR is 2.58 percentage points lower than that of VV and as a result, would have yielded $12,188 less on a $10,000 investment. Thus, XLF performed worse than VV by 2.58% annually.
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