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XLI vs. VTIP: What’s The Difference?

The Industrial Select Sector SPDR Fund (XLI) and the Vanguard Short-Term Inflation-Protected Securities Index Fund ETF Shares (VTIP) are both among the Top 100 ETFs. XLI is a SPDR State Street Global Advisors Industrials fund and VTIP is a Vanguard Inflation-Protected Bond fund. So, what’s the difference between XLI and VTIP? And which fund is better?

The expense ratio of XLI is 0.07 percentage points higher than VTIP’s (0.12% vs. 0.05%). XLI also has a high exposure to the industrials sector while VTIP is mostly comprised of AAA bonds. Overall, XLI has provided higher returns than VTIP over the past 7 years.

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

Summary

XLIVTIP
NameIndustrial Select Sector SPDR FundVanguard Short-Term Inflation-Protected Securities Index Fund ETF Shares
CategoryIndustrialsInflation-Protected Bond
IssuerSPDR State Street Global AdvisorsVanguard
AUM19.33B50.67B
Avg. Return14.44%1.79%
Div. Yield1.25%1.35%
Expense Ratio0.12%0.05%

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 Short-Term Inflation-Protected Securities Index Fund ETF Shares (VTIP) is a Inflation-Protected Bond fund that is issued by Vanguard. It currently has 50.67B total assets under management and has yielded an average annual return of 1.79% over the past 10 years. The fund has a dividend yield of 1.35% with an expense ratio of 0.05%.

XLI’s dividend yield is 0.10% lower than that of VTIP (1.25% vs. 1.35%). Also, XLI yielded on average 12.65% more per year over the past decade (14.44% vs. 1.79%). The expense ratio of XLI is 0.07 percentage points higher than VTIP’s (0.12% vs. 0.05%).

Fund Composition

Holdings

XLI - Holdings

XLI HoldingsWeight
Honeywell International Inc4.9%
United Parcel Service Inc Class B4.84%
Union Pacific Corp4.7%
Boeing Co4.24%
Raytheon Technologies Corp4.16%
Caterpillar Inc3.84%
General Electric Co3.8%
3M Co3.7%
Deere & Co3.54%
Lockheed Martin Corp2.98%

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%.

VTIP - Holdings

VTIP Bond SectorsWeight
AAA99.87%
Others0.13%
Below B0.0%
B0.0%
BB0.0%
BBB0.0%
A0.0%
AA0.0%
US Government0.0%

VTIP’s Top Bond Sectors are ratings of AAA, Others, Below B, B, and BB at 99.87%, 0.13%, 0.0%, 0.0%, and 0.0%. The fund is less weighted towards BBB (0.0%), A (0.0%), and AA (0.0%) rated bonds.

Risk Analysis

XLIVTIP
Mean Return1.140
R-squared78.970
Std. Deviation17.130
Alpha2.380
Beta1.080
Sharpe Ratio0.760
Treynor Ratio11.340

The Industrial Select Sector SPDR Fund (XLI) has a Sharpe Ratio of 0.76 with a Beta of 1.08 and a Standard Deviation of 17.13. 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 R-squared of 78.97.

The Vanguard Short-Term Inflation-Protected Securities Index Fund ETF Shares (VTIP) has a Alpha of 0 with a Mean Return of 0 and a Sharpe Ratio of 0. Its Beta is 0 while VTIP’s Treynor Ratio is 0. Furthermore, the fund has a Standard Deviation of 0 and a R-squared of 0.

XLI’s Mean Return is 1.14 points higher than that of VTIP and its R-squared is 78.97 points higher. With a Standard Deviation of 17.13, XLI is slightly more volatile than VTIP. The Alpha and Beta of XLI are 2.38 points higher and 1.08 points higher than VTIP’s Alpha and Beta.

Performance

Annual Returns

XLI vs. VTIP - Annual Returns

YearXLIVTIP
202011.0%4.97%
201929.11%4.83%
2018-13.1%0.54%
201723.85%0.82%
201619.93%2.71%
2015-4.27%-0.15%
201410.44%-1.17%
201340.44%-1.55%
201214.86%0.0%
2011-1.01%0.0%
201027.62%0.0%

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 2020 was the strongest year for VTIP, returning 4.97% on an annual basis. The poorest year for VTIP in the last ten years was 2013, with a yield of -1.55%. Most years the Vanguard Short-Term Inflation-Protected Securities Index Fund ETF Shares has given investors modest returns, such as in 2011, 2010, and 2018, when gains were 0.0%, 0.0%, and 0.54% respectively.

Portfolio Growth

XLI vs. VTIP - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
XLI$10,000$19,55614.44%
VTIP$10,000$11,3051.79%

A $10,000 investment in XLI would have resulted in a final balance of $19,556. This is a profit of $9,556 over 7 years and amounts to a compound annual growth rate (CAGR) of 14.44%.

With a $10,000 investment in VTIP, the end total would have been $11,305. This equates to a $1,305 profit over 7 years and a compound annual growth rate (CAGR) of 1.79%.

XLI’s CAGR is 12.65 percentage points higher than that of VTIP and as a result, would have yielded $8,251 more on a $10,000 investment. Thus, XLI outperformed VTIP by 12.65% annually.


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