XLK vs. VBR: What’s The Difference?

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

The expense ratio of XLK is 0.05 percentage points higher than VBR’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 VBR over the past ten years.

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

Summary

XLK VBR
Name Technology Select Sector SPDR Fund Vanguard Small-Cap Value Index Fund ETF Shares
Category Technology Small Value
Issuer SPDR State Street Global Advisors Vanguard
AUM 42.3B 48.08B
Avg. Return 20.02% 12.28%
Div. Yield 0.73% 1.6%
Expense Ratio 0.12% 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 Value Index Fund ETF Shares (VBR) is a Small Value fund that is issued by Vanguard. It currently has 48.08B total assets under management and has yielded an average annual return of 12.28% over the past 10 years. The fund has a dividend yield of 1.6% with an expense ratio of 0.07%.

XLK’s dividend yield is 0.87% lower than that of VBR (0.73% vs. 1.6%). Also, XLK yielded on average 7.74% more per year over the past decade (20.02% vs. 12.28%). The expense ratio of XLK is 0.05 percentage points higher than VBR’s (0.12% vs. 0.07%).

Fund Composition

Industry Exposure

XLK vs. VBR - Industry Exposure

XLK VBR
Technology 87.54% 8.39%
Industrials 1.75% 18.44%
Energy 0.0% 5.15%
Communication Services 0.0% 1.77%
Utilities 0.0% 3.65%
Healthcare 0.0% 7.16%
Consumer Defensive 0.0% 4.36%
Real Estate 0.0% 10.92%
Financial Services 10.71% 20.04%
Consumer Cyclical 0.0% 13.82%
Basic Materials 0.0% 6.31%

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 Value Index Fund ETF Shares (VBR) has the most exposure to the Financial Services sector at 20.04%. This is followed by Industrials and Consumer Cyclical at 18.44% and 13.82% respectively. Utilities (3.65%), Consumer Defensive (4.36%), and Energy (5.15%) only make up 13.16% of the fund’s total assets.

VBR’s mid-section with moderate exposure is comprised of Basic Materials, Healthcare, Technology, Real Estate, and Consumer Cyclical stocks at 6.31%, 7.16%, 8.39%, 10.92%, and 13.82%.

XLK is 79.15% more exposed to the Technology sector than VBR (87.54% vs 8.39%). XLK’s exposure to Financial Services and Industrials stocks is 9.33% lower and 16.69% lower respectively (10.71% vs. 20.04% and 1.75% vs. 18.44%). In total, Consumer Cyclical, Real Estate, and Consumer Defensive also make up 29.10% less of the fund’s holdings compared to VBR (0.00% vs. 29.10%).

Holdings

XLK - Holdings

XLK Holdings Weight
Apple Inc 21.45%
Microsoft Corp 20.37%
NVIDIA Corp 4.98%
Visa Inc Class A 3.95%
PayPal Holdings Inc 3.42%
Mastercard Inc A 3.19%
Adobe Inc 2.8%
Salesforce.com Inc 2.26%
Intel Corp 2.26%
Cisco Systems Inc 2.23%

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%.

VBR - Holdings

VBR Holdings Weight
Diamondback Energy Inc 0.55%
VICI Properties Inc Ordinary Shares 0.54%
IDEX Corp 0.54%
Nuance Communications Inc 0.5%
Molina Healthcare Inc 0.48%
Signature Bank 0.46%
Novavax Inc 0.44%
Howmet Aerospace Inc 0.44%
Apollo Global Management Inc Class A 0.42%
Brown & Brown Inc 0.41%

VBR’s Top Holdings are Diamondback Energy Inc, VICI Properties Inc Ordinary Shares, IDEX Corp, Nuance Communications Inc, and Molina Healthcare Inc at 0.55%, 0.54%, 0.54%, 0.5%, and 0.48%.

Signature Bank (0.46%), Novavax Inc (0.44%), and Howmet Aerospace Inc (0.44%) have a slightly smaller but still significant weight. Apollo Global Management Inc Class A and Brown & Brown Inc are also represented in the VBR’s holdings at 0.42% and 0.41%.

Risk Analysis

XLK VBR
Mean Return 1.7 1.08
R-squared 73.56 82.2
Std. Deviation 15.58 18.37
Alpha 10.43 -5.09
Beta 0.95 1.23
Sharpe Ratio 1.27 0.67
Treynor Ratio 21.44 9.15

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

The Vanguard Small-Cap Value Index Fund ETF Shares (VBR) has a Sharpe Ratio of 0.67 with a Alpha of -5.09 and a Standard Deviation of 18.37. Its Treynor Ratio is 9.15 while VBR’s Mean Return is 1.08. Furthermore, the fund has a Beta of 1.23 and a R-squared of 82.2.

XLK’s Mean Return is 0.62 points higher than that of VBR and its R-squared is 8.64 points lower. With a Standard Deviation of 15.58, XLK is slightly less volatile than VBR. The Alpha and Beta of XLK are 15.52 points higher and 0.28 points lower than VBR’s Alpha and Beta.

Performance

Annual Returns

XLK vs. VBR - Annual Returns

Year XLK VBR
2020 43.67% 5.82%
2019 49.97% 22.76%
2018 -1.56% -12.22%
2017 34.27% 11.79%
2016 14.81% 24.8%
2015 5.62% -4.67%
2014 17.75% 10.55%
2013 25.98% 36.57%
2012 15.47% 18.78%
2011 2.69% -4.05%
2010 11.6% 24.97%

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 VBR, returning 36.57% on an annual basis. The poorest year for VBR in the last ten years was 2018, with a yield of -12.22%. Most years the Vanguard Small-Cap Value Index Fund ETF Shares has given investors modest returns, such as in 2014, 2017, and 2012, when gains were 10.55%, 11.79%, and 18.78% respectively.

Portfolio Growth

XLK vs. VBR - Portfolio Growth

Fund Initial Balance Final Balance CAGR
XLK $10,000 $67,790 20.02%
VBR $10,000 $32,611 12.28%

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 VBR, the end total would have been $32,611. This equates to a $22,611 profit over 11 years and a compound annual growth rate (CAGR) of 12.28%.

XLK’s CAGR is 7.74 percentage points higher than that of VBR and as a result, would have yielded $35,179 more on a $10,000 investment. Thus, XLK outperformed VBR by 7.74% annually.


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