XLK vs. VEU: What’s The Difference?

The Technology Select Sector SPDR Fund (XLK) and the Vanguard FTSE All-World ex-US Index Fund ETF Shares (VEU) are both among the Top 100 ETFs. XLK is a SPDR State Street Global Advisors Technology fund and VEU is a Vanguard Foreign Large Blend fund. So, what’s the difference between XLK and VEU? And which fund is better?

The expense ratio of XLK is 0.04 percentage points higher than VEU’s (0.12% vs. 0.08%). XLK also has a higher exposure to the technology sector and a higher standard deviation. Overall, XLK has provided higher returns than VEU over the past ten years.

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

Summary

XLK VEU
Name Technology Select Sector SPDR Fund Vanguard FTSE All-World ex-US Index Fund ETF Shares
Category Technology Foreign Large Blend
Issuer SPDR State Street Global Advisors Vanguard
AUM 42.3B 53.64B
Avg. Return 20.02% 6.64%
Div. Yield 0.73% 2.31%
Expense Ratio 0.12% 0.08%

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 FTSE All-World ex-US Index Fund ETF Shares (VEU) is a Foreign Large Blend fund that is issued by Vanguard. It currently has 53.64B total assets under management and has yielded an average annual return of 6.64% over the past 10 years. The fund has a dividend yield of 2.31% with an expense ratio of 0.08%.

XLK’s dividend yield is 1.58% lower than that of VEU (0.73% vs. 2.31%). Also, XLK yielded on average 13.39% more per year over the past decade (20.02% vs. 6.64%). The expense ratio of XLK is 0.04 percentage points higher than VEU’s (0.12% vs. 0.08%).

Fund Composition

Industry Exposure

XLK vs. VEU - Industry Exposure

XLK VEU
Technology 87.54% 12.94%
Industrials 1.75% 12.19%
Energy 0.0% 4.69%
Communication Services 0.0% 7.44%
Utilities 0.0% 2.89%
Healthcare 0.0% 9.34%
Consumer Defensive 0.0% 8.28%
Real Estate 0.0% 3.04%
Financial Services 10.71% 18.46%
Consumer Cyclical 0.0% 12.57%
Basic Materials 0.0% 8.17%

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 FTSE All-World ex-US Index Fund ETF Shares (VEU) has the most exposure to the Financial Services sector at 18.46%. This is followed by Technology and Consumer Cyclical at 12.94% and 12.57% respectively. Real Estate (3.04%), Energy (4.69%), and Communication Services (7.44%) only make up 15.17% of the fund’s total assets.

VEU’s mid-section with moderate exposure is comprised of Basic Materials, Consumer Defensive, Healthcare, Industrials, and Consumer Cyclical stocks at 8.17%, 8.28%, 9.34%, 12.19%, and 12.57%.

XLK is 74.60% more exposed to the Technology sector than VEU (87.54% vs 12.94%). XLK’s exposure to Financial Services and Industrials stocks is 7.75% lower and 10.44% lower respectively (10.71% vs. 18.46% and 1.75% vs. 12.19%). In total, Consumer Cyclical, Real Estate, and Consumer Defensive also make up 23.89% less of the fund’s holdings compared to VEU (0.00% vs. 23.89%).

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%.

VEU - Holdings

VEU Holdings Weight
Tencent Holdings Ltd 1.57%
Alibaba Group Holding Ltd Ordinary Shares 1.4%
Nestle SA 1.22%
Taiwan Semiconductor Manufacturing Co Ltd 0.98%
ASML Holding NV 0.95%
Taiwan Semiconductor Manufacturing Co Ltd ADR 0.91%
Roche Holding AG 0.91%
Toyota Motor Corp 0.75%
LVMH Moet Hennessy Louis Vuitton SE 0.68%
Novartis AG 0.67%

VEU’s Top Holdings are Tencent Holdings Ltd, Alibaba Group Holding Ltd Ordinary Shares, Nestle SA, Taiwan Semiconductor Manufacturing Co Ltd, and ASML Holding NV at 1.57%, 1.4%, 1.22%, 0.98%, and 0.95%.

Taiwan Semiconductor Manufacturing Co Ltd ADR (0.91%), Roche Holding AG (0.91%), and Toyota Motor Corp (0.75%) have a slightly smaller but still significant weight. LVMH Moet Hennessy Louis Vuitton SE and Novartis AG are also represented in the VEU’s holdings at 0.68% and 0.67%.

Risk Analysis

XLK VEU
Mean Return 1.7 0.56
R-squared 73.56 98.44
Std. Deviation 15.58 15.08
Alpha 10.43 0.28
Beta 0.95 0.99
Sharpe Ratio 1.27 0.4
Treynor Ratio 21.44 5.12

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

The Vanguard FTSE All-World ex-US Index Fund ETF Shares (VEU) has a R-squared of 98.44 with a Alpha of 0.28 and a Mean Return of 0.56. Its Beta is 0.99 while VEU’s Standard Deviation is 15.08. Furthermore, the fund has a Treynor Ratio of 5.12 and a Sharpe Ratio of 0.4.

XLK’s Mean Return is 1.14 points higher than that of VEU and its R-squared is 24.88 points lower. With a Standard Deviation of 15.58, XLK is slightly more volatile than VEU. The Alpha and Beta of XLK are 10.15 points higher and 0.04 points lower than VEU’s Alpha and Beta.

Performance

Annual Returns

XLK vs. VEU - Annual Returns

Year XLK VEU
2020 43.67% 11.39%
2019 49.97% 21.63%
2018 -1.56% -13.97%
2017 34.27% 27.27%
2016 14.81% 4.77%
2015 5.62% -4.67%
2014 17.75% -4.05%
2013 25.98% 14.5%
2012 15.47% 18.55%
2011 2.69% -14.25%
2010 11.6% 11.85%

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 2017 was the strongest year for VEU, returning 27.27% on an annual basis. The poorest year for VEU in the last ten years was 2011, with a yield of -14.25%. Most years the Vanguard FTSE All-World ex-US Index Fund ETF Shares has given investors modest returns, such as in 2016, 2020, and 2010, when gains were 4.77%, 11.39%, and 11.85% respectively.

Portfolio Growth

XLK vs. VEU - Portfolio Growth

Fund Initial Balance Final Balance CAGR
XLK $10,000 $67,790 20.02%
VEU $10,000 $18,507 6.64%

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 VEU, the end total would have been $18,507. This equates to a $8,507 profit over 11 years and a compound annual growth rate (CAGR) of 6.64%.

XLK’s CAGR is 13.39 percentage points higher than that of VEU and as a result, would have yielded $49,283 more on a $10,000 investment. Thus, XLK outperformed VEU by 13.39% 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 Gemini. I've started allocating a small amount of assets to the growing crypto space and Gemini has just been a breeze to use. Once you register, make sure to also open an Active Trader account to buy crypto at the lowest fees on the market (just 0.03%!).

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

Leave a Reply