XLI vs. VBK: What’s The Difference?

The Industrial Select Sector SPDR Fund (XLI) and the Vanguard Small-Cap Growth Index Fund ETF Shares (VBK) are both among the Top 100 ETFs. XLI is a SPDR State Street Global Advisors Industrials fund and VBK is a Vanguard Small Growth fund. So, what’s the difference between XLI and VBK? And which fund is better?

The expense ratio of XLI is 0.05 percentage points higher than VBK’s (0.12% vs. 0.07%). XLI also has a higher exposure to the industrials sector and a lower standard deviation. Overall, XLI has provided lower returns than VBK over the past 11 years.

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

Summary

XLI VBK
Name Industrial Select Sector SPDR Fund Vanguard Small-Cap Growth Index Fund ETF Shares
Category Industrials Small Growth
Issuer SPDR State Street Global Advisors Vanguard
AUM 19.33B 37.89B
Avg. Return 14.44% 16.53%
Div. Yield 1.25% 0.45%
Expense Ratio 0.12% 0.07%

The Industrial Select Sector SPDR Fund (XLI) is a Industrials fund that is issued by SPDR State Street Global Advisors. It currently has 19.33B total assets under management and has yielded an average annual return of 14.44% over the past 10 years. The fund has a dividend yield of 1.25% with an expense ratio of 0.12%.

The Vanguard Small-Cap Growth Index Fund ETF Shares (VBK) is a Small Growth fund that is issued by Vanguard. It currently has 37.89B total assets under management and has yielded an average annual return of 16.53% over the past 10 years. The fund has a dividend yield of 0.45% with an expense ratio of 0.07%.

XLI’s dividend yield is 0.80% higher than that of VBK (1.25% vs. 0.45%). Also, XLI yielded on average 2.08% less per year over the past decade (14.44% vs. 16.53%). The expense ratio of XLI is 0.05 percentage points higher than VBK’s (0.12% vs. 0.07%).

FYI: The best way I've found to invest in ETFs is through M1 Finance. It's free and you even get an instant line of credit! Have a look here (link to M1 Finance).

Fund Composition

Industry Exposure

XLI vs. VBK - Industry Exposure

XLI VBK
Technology 1.82% 27.87%
Industrials 97.49% 13.19%
Energy 0.0% 1.77%
Communication Services 0.0% 3.24%
Utilities 0.0% 0.32%
Healthcare 0.0% 23.24%
Consumer Defensive 0.0% 3.83%
Real Estate 0.0% 7.87%
Financial Services 0.0% 4.05%
Consumer Cyclical 0.69% 12.13%
Basic Materials 0.0% 2.49%

The Industrial Select Sector SPDR Fund (XLI) has the most exposure to the Industrials sector at 97.49%. This is followed by Technology and Consumer Cyclical at 1.82% and 0.69% respectively. Financial Services (0.0%), Real Estate (0.0%), and Consumer Defensive (0.0%) only make up 0.00% of the fund’s total assets.

XLI’s mid-section with moderate exposure is comprised of Healthcare, Utilities, Communication Services, Energy, and Consumer Cyclical stocks at 0.0%, 0.0%, 0.0%, 0.0%, and 0.69%.

The Vanguard Small-Cap Growth Index Fund ETF Shares (VBK) has the most exposure to the Technology sector at 27.87%. This is followed by Healthcare and Industrials at 23.24% and 13.19% respectively. Energy (1.77%), Basic Materials (2.49%), and Communication Services (3.24%) only make up 7.50% of the fund’s total assets.

VBK’s mid-section with moderate exposure is comprised of Consumer Defensive, Financial Services, Real Estate, Consumer Cyclical, and Industrials stocks at 3.83%, 4.05%, 7.87%, 12.13%, and 13.19%.

XLI is 84.30% more exposed to the Industrials sector than VBK (97.49% vs 13.19%). XLI’s exposure to Technology and Consumer Cyclical stocks is 26.05% lower and 11.44% lower respectively (1.82% vs. 27.87% and 0.69% vs. 12.13%). In total, Financial Services, Real Estate, and Consumer Defensive also make up 15.75% less of the fund’s holdings compared to VBK (0.00% vs. 15.75%).

Holdings

XLI - Holdings

XLI Holdings Weight
Honeywell International Inc 4.9%
United Parcel Service Inc Class B 4.84%
Union Pacific Corp 4.7%
Boeing Co 4.24%
Raytheon Technologies Corp 4.16%
Caterpillar Inc 3.84%
General Electric Co 3.8%
3M Co 3.7%
Deere & Co 3.54%
Lockheed Martin Corp 2.98%

XLI’s Top Holdings are Honeywell International Inc, United Parcel Service Inc Class B, Union Pacific Corp, Boeing Co, and Raytheon Technologies Corp at 4.9%, 4.84%, 4.7%, 4.24%, and 4.16%.

Caterpillar Inc (3.84%), General Electric Co (3.8%), and 3M Co (3.7%) have a slightly smaller but still significant weight. Deere & Co and Lockheed Martin Corp are also represented in the XLI’s holdings at 3.54% and 2.98%.

VBK - Holdings

VBK Holdings Weight
Charles River Laboratories International Inc 0.78%
Pool Corp 0.73%
Bio-Techne Corp 0.73%
Avantor Inc 0.73%
PerkinElmer Inc 0.72%
Entegris Inc 0.7%
PTC Inc 0.62%
Fair Isaac Corp 0.57%
Bill.com Holdings Inc Ordinary Shares 0.56%
Avalara Inc 0.55%

VBK’s Top Holdings are Charles River Laboratories International Inc, Pool Corp, Bio-Techne Corp, Avantor Inc, and PerkinElmer Inc at 0.78%, 0.73%, 0.73%, 0.73%, and 0.72%.

Entegris Inc (0.7%), PTC Inc (0.62%), and Fair Isaac Corp (0.57%) have a slightly smaller but still significant weight. Bill.com Holdings Inc Ordinary Shares and Avalara Inc are also represented in the VBK’s holdings at 0.56% and 0.55%.

NOTE: The easiest way to add diversification to your portfolio is to invest in real estate through Fundrise. You can become private real estate investor without the burden of property management! Check it out here (link to Fundrise).

Risk Analysis

XLI VBK
Mean Return 1.14 1.22
R-squared 78.97 80.56
Std. Deviation 17.13 17.95
Alpha 2.38 -2.81
Beta 1.08 1.18
Sharpe Ratio 0.76 0.78
Treynor Ratio 11.34 11.18

The Industrial Select Sector SPDR Fund (XLI) has a Sharpe Ratio of 0.76 with a Standard Deviation of 17.13 and a R-squared of 78.97. Its Mean Return is 1.14 while XLI’s Treynor Ratio is 11.34. Furthermore, the fund has a Alpha of 2.38 and a Beta of 1.08.

The Vanguard Small-Cap Growth Index Fund ETF Shares (VBK) has a Alpha of -2.81 with a Standard Deviation of 17.95 and a Sharpe Ratio of 0.78. Its Treynor Ratio is 11.18 while VBK’s R-squared is 80.56. Furthermore, the fund has a Mean Return of 1.22 and a Beta of 1.18.

XLI’s Mean Return is 0.08 points lower than that of VBK and its R-squared is 1.59 points lower. With a Standard Deviation of 17.13, XLI is slightly less volatile than VBK. The Alpha and Beta of XLI are 5.19 points higher and 0.10 points lower than VBK’s Alpha and Beta.

BTW: Uncorrelated crypto assets such as Bitcoin can serve as a hedge and mitigate risk. I've allocated around 5% of my portfolio to crypto assets through Coinbase - the simplest and cheapest broker I've found! Click here to read more (link to Coinbase).

Performance

Annual Returns

XLI vs. VBK - Annual Returns

Year XLI VBK
2020 11.0% 35.29%
2019 29.11% 32.75%
2018 -13.1% -5.68%
2017 23.85% 21.9%
2016 19.93% 10.74%
2015 -4.27% -2.51%
2014 10.44% 4.02%
2013 40.44% 38.18%
2012 14.86% 17.67%
2011 -1.01% -1.43%
2010 27.62% 30.87%

XLI had its best year in 2013 with an annual return of 40.44%. XLI’s worst year over the past decade yielded -13.1% and occurred in 2018. In most years the Industrial Select Sector SPDR Fund provided moderate returns such as in 2020, 2012, and 2016 where annual returns amounted to 11.0%, 14.86%, and 19.93% respectively.

The year 2013 was the strongest year for VBK, returning 38.18% on an annual basis. The poorest year for VBK in the last ten years was 2018, with a yield of -5.68%. Most years the Vanguard Small-Cap Growth Index Fund ETF Shares has given investors modest returns, such as in 2016, 2012, and 2017, when gains were 10.74%, 17.67%, and 21.9% respectively.

Portfolio Growth

XLI vs. VBK - Portfolio Growth

Fund Initial Balance Final Balance CAGR
XLI $10,000 $39,853 14.44%
VBK $10,000 $48,639 16.53%

A $10,000 investment in XLI would have resulted in a final balance of $39,853. This is a profit of $29,853 over 11 years and amounts to a compound annual growth rate (CAGR) of 14.44%.

With a $10,000 investment in VBK, the end total would have been $48,639. This equates to a $38,639 profit over 11 years and a compound annual growth rate (CAGR) of 16.53%.

XLI’s CAGR is 2.08 percentage points lower than that of VBK and as a result, would have yielded $8,786 less on a $10,000 investment. Thus, XLI performed worse than VBK by 2.08% annually.


Current recommendations:

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) 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!

2) 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!).

3) If you are interested in crypto, check out Coinbase. I've started allocating a small amount of assets to the growing crypto space and Coinbase has just been a breeze to use. Once you register, make sure to also open an Coinbase Pro account to buy crypto at the lowest fees on the market (just 0.1%!).

To see all of my most up-to-date recommendations, check out the Recommended Tools section.

Leave a Reply