The Financial Select Sector SPDR Fund (XLF) and the Vanguard Extended Market Index Fund ETF Shares (VXF) are both among the Top 100 ETFs. XLF is a SPDR State Street Global Advisors Financial fund and VXF is a Vanguard Mid-Cap Growth fund. So, what’s the difference between XLF and VXF? And which fund is better?
The expense ratio of XLF is 0.06 percentage points higher than VXF’s (0.12% vs. 0.06%). XLF also has a higher exposure to the financial services sector and a higher standard deviation. Overall, XLF has provided lower returns than VXF over the past ten years.
In this article, we’ll compare XLF vs. VXF. We’ll look at annual returns and industry exposure, as well as at their holdings and risk metrics. Moreover, I’ll also discuss XLF’s and VXF’s performance, fund composition, and portfolio growth and examine how these affect their overall returns.
|Name||Financial Select Sector SPDR Fund||Vanguard Extended Market 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 Extended Market Index Fund ETF Shares (VXF) is a Mid-Cap Growth fund that is issued by Vanguard. It currently has 114.53B total assets under management and has yielded an average annual return of 15.47% over the past 10 years. The fund has a dividend yield of 1.19% with an expense ratio of 0.06%.
XLF’s dividend yield is 0.38% higher than that of VXF (1.57% vs. 1.19%). Also, XLF yielded on average 3.31% less per year over the past decade (12.17% vs. 15.47%). The expense ratio of XLF is 0.06 percentage points higher than VXF’s (0.12% vs. 0.06%).
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 Extended Market Index Fund ETF Shares (VXF) has the most exposure to the Technology sector at 23.61%. This is followed by Healthcare and Financial Services at 15.25% and 12.56% respectively. Energy (2.46%), Consumer Defensive (3.09%), and Basic Materials (3.26%) only make up 8.81% of the fund’s total assets.
VXF’s mid-section with moderate exposure is comprised of Communication Services, Real Estate, Industrials, Consumer Cyclical, and Financial Services stocks at 7.29%, 8.16%, 11.31%, 11.35%, and 12.56%.
XLF is 87.44% more exposed to the Financial Services sector than VXF (100.0% vs 12.56%). XLF’s exposure to Technology and Industrials stocks is 23.61% lower and 11.31% lower respectively (0.0% vs. 23.61% and 0.0% vs. 11.31%). In total, Consumer Cyclical, Real Estate, and Consumer Defensive also make up 22.60% less of the fund’s holdings compared to VXF (0.00% vs. 22.60%).
|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%.
|Square Inc A||1.2%|
|Zoom Video Communications Inc||1.04%|
|Uber Technologies Inc||0.93%|
|Blackstone Group Inc||0.83%|
|Snap Inc Class A||0.8%|
|Twilio Inc A||0.73%|
|CrowdStrike Holdings Inc Class A||0.63%|
|Marvell Technology Inc||0.6%|
VXF’s Top Holdings are Square Inc A, Zoom Video Communications Inc, Uber Technologies Inc, Moderna Inc, and Blackstone Group Inc at 1.2%, 1.04%, 0.93%, 0.9%, and 0.83%.
Snap Inc Class A (0.8%), Twilio Inc A (0.73%), and DocuSign Inc (0.68%) have a slightly smaller but still significant weight. CrowdStrike Holdings Inc Class A and Marvell Technology Inc are also represented in the VXF’s holdings at 0.63% and 0.6%.
The Financial Select Sector SPDR Fund (XLF) has a Treynor Ratio of 11.25 with a Standard Deviation of 18.86 and a Sharpe Ratio of 0.74. Its Beta is 1.15 while XLF’s R-squared is 73.26. Furthermore, the fund has a Alpha of 2.63 and a Mean Return of 1.21.
The Vanguard Extended Market Index Fund ETF Shares (VXF) has a Standard Deviation of 18.04 with a Mean Return of 1.24 and a Sharpe Ratio of 0.79. Its R-squared is 85.73 while VXF’s Treynor Ratio is 10.92. Furthermore, the fund has a Beta of 1.23 and a Alpha of -3.26.
XLF’s Mean Return is 0.03 points lower than that of VXF and its R-squared is 12.47 points lower. With a Standard Deviation of 18.86, XLF is slightly more volatile than VXF. The Alpha and Beta of XLF are 5.89 points higher and 0.08 points lower than VXF’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 2013 was the strongest year for VXF, returning 38.37% on an annual basis. The poorest year for VXF in the last ten years was 2018, with a yield of -9.37%. Most years the Vanguard Extended Market Index Fund ETF Shares has given investors modest returns, such as in 2016, 2017, and 2012, when gains were 16.16%, 18.1%, and 18.48% 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 VXF, the end total would have been $44,130. This equates to a $34,130 profit over 11 years and a compound annual growth rate (CAGR) of 15.47%.
XLF’s CAGR is 3.31 percentage points lower than that of VXF and as a result, would have yielded $13,348 less on a $10,000 investment. Thus, XLF performed worse than VXF by 3.31% annually.
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