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XLK vs. VBK: What’s The Difference?

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

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

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

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Summary

XLKVBK
NameTechnology Select Sector SPDR FundVanguard Small-Cap Growth Index Fund ETF Shares
CategoryTechnologySmall Growth
IssuerSPDR State Street Global AdvisorsVanguard
AUM42.3B37.89B
Avg. Return20.02%16.53%
Div. Yield0.73%0.45%
Expense Ratio0.12%0.07%

The Technology Select Sector SPDR Fund (XLK) is a Technology fund that is issued by SPDR State Street Global Advisors. It currently has 42.3B total assets under management and has yielded an average annual return of 20.02% over the past 10 years. The fund has a dividend yield of 0.73% 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%.

XLK’s dividend yield is 0.28% higher than that of VBK (0.73% vs. 0.45%). Also, XLK yielded on average 3.50% more per year over the past decade (20.02% vs. 16.53%). The expense ratio of XLK is 0.05 percentage points higher than VBK’s (0.12% vs. 0.07%).

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Fund Composition

Industry Exposure

XLK vs. VBK - Industry Exposure

XLKVBK
Technology87.54%27.87%
Industrials1.75%13.19%
Energy0.0%1.77%
Communication Services0.0%3.24%
Utilities0.0%0.32%
Healthcare0.0%23.24%
Consumer Defensive0.0%3.83%
Real Estate0.0%7.87%
Financial Services10.71%4.05%
Consumer Cyclical0.0%12.13%
Basic Materials0.0%2.49%

The Technology Select Sector SPDR Fund (XLK) has the most exposure to the Technology sector at 87.54%. This is followed by Financial Services and Industrials at 10.71% and 1.75% 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.

XLK’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 1.75%.

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%.

XLK is 59.67% more exposed to the Technology sector than VBK (87.54% vs 27.87%). XLK’s exposure to Financial Services and Industrials stocks is 6.66% higher and 11.44% lower respectively (10.71% vs. 4.05% and 1.75% vs. 13.19%). In total, Consumer Cyclical, Real Estate, and Consumer Defensive also make up 23.83% less of the fund’s holdings compared to VBK (0.00% vs. 23.83%).

Holdings

XLK - Holdings

XLK HoldingsWeight
Apple Inc21.45%
Microsoft Corp20.37%
NVIDIA Corp4.98%
Visa Inc Class A3.95%
PayPal Holdings Inc3.42%
Mastercard Inc A3.19%
Adobe Inc2.8%
Salesforce.com Inc2.26%
Intel Corp2.26%
Cisco Systems Inc2.23%

XLK’s Top Holdings are Apple Inc, Microsoft Corp, NVIDIA Corp, Visa Inc Class A, and PayPal Holdings Inc at 21.45%, 20.37%, 4.98%, 3.95%, and 3.42%.

Mastercard Inc A (3.19%), Adobe Inc (2.8%), and Salesforce.com Inc (2.26%) have a slightly smaller but still significant weight. Intel Corp and Cisco Systems Inc are also represented in the XLK’s holdings at 2.26% and 2.23%.

VBK - Holdings

VBK HoldingsWeight
Charles River Laboratories International Inc0.78%
Pool Corp0.73%
Bio-Techne Corp0.73%
Avantor Inc0.73%
PerkinElmer Inc0.72%
Entegris Inc0.7%
PTC Inc0.62%
Fair Isaac Corp0.57%
Bill.com Holdings Inc Ordinary Shares0.56%
Avalara Inc0.55%

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%.

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Risk Analysis

XLKVBK
Mean Return1.71.22
R-squared73.5680.56
Std. Deviation15.5817.95
Alpha10.43-2.81
Beta0.951.18
Sharpe Ratio1.270.78
Treynor Ratio21.4411.18

The Technology Select Sector SPDR Fund (XLK) has a R-squared of 73.56 with a Treynor Ratio of 21.44 and a Alpha of 10.43. Its Sharpe Ratio is 1.27 while XLK’s Mean Return is 1.7. Furthermore, the fund has a Standard Deviation of 15.58 and a Beta of 0.95.

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

XLK’s Mean Return is 0.48 points higher than that of VBK and its R-squared is 7.00 points lower. With a Standard Deviation of 15.58, XLK is slightly less volatile than VBK. The Alpha and Beta of XLK are 13.24 points higher and 0.23 points lower than VBK’s Alpha and Beta.

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Performance

Annual Returns

XLK vs. VBK - Annual Returns

YearXLKVBK
202043.67%35.29%
201949.97%32.75%
2018-1.56%-5.68%
201734.27%21.9%
201614.81%10.74%
20155.62%-2.51%
201417.75%4.02%
201325.98%38.18%
201215.47%17.67%
20112.69%-1.43%
201011.6%30.87%

XLK had its best year in 2019 with an annual return of 49.97%. XLK’s worst year over the past decade yielded -1.56% and occurred in 2018. In most years the Technology Select Sector SPDR Fund provided moderate returns such as in 2016, 2012, and 2014 where annual returns amounted to 14.81%, 15.47%, and 17.75% 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

XLK vs. VBK - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
XLK$10,000$67,79020.02%
VBK$10,000$48,63916.53%

A $10,000 investment in XLK would have resulted in a final balance of $67,790. This is a profit of $57,790 over 11 years and amounts to a compound annual growth rate (CAGR) of 20.02%.

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%.

XLK’s CAGR is 3.50 percentage points higher than that of VBK and as a result, would have yielded $19,151 more on a $10,000 investment. Thus, XLK outperformed VBK by 3.50% annually.


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