XLK vs. VGK: What’s The Difference?

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

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

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

Summary

XLK VGK
Name Technology Select Sector SPDR Fund Vanguard FTSE Europe Index Fund ETF Shares
Category Technology Europe Stock
Issuer SPDR State Street Global Advisors Vanguard
AUM 42.3B 25.7B
Avg. Return 20.02% 6.68%
Div. Yield 0.73% 2.52%
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 Europe Index Fund ETF Shares (VGK) is a Europe Stock fund that is issued by Vanguard. It currently has 25.7B total assets under management and has yielded an average annual return of 6.68% over the past 10 years. The fund has a dividend yield of 2.52% with an expense ratio of 0.08%.

XLK’s dividend yield is 1.79% lower than that of VGK (0.73% vs. 2.52%). Also, XLK yielded on average 13.35% more per year over the past decade (20.02% vs. 6.68%). The expense ratio of XLK is 0.04 percentage points higher than VGK’s (0.12% vs. 0.08%).

Fund Composition

Industry Exposure

XLK vs. VGK - Industry Exposure

XLK VGK
Technology 87.54% 8.3%
Industrials 1.75% 15.58%
Energy 0.0% 4.3%
Communication Services 0.0% 5.09%
Utilities 0.0% 3.89%
Healthcare 0.0% 13.76%
Consumer Defensive 0.0% 11.39%
Real Estate 0.0% 2.57%
Financial Services 10.71% 15.85%
Consumer Cyclical 0.0% 11.6%
Basic Materials 0.0% 7.67%

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 Europe Index Fund ETF Shares (VGK) has the most exposure to the Financial Services sector at 15.85%. This is followed by Industrials and Healthcare at 15.58% and 13.76% respectively. Utilities (3.89%), Energy (4.3%), and Communication Services (5.09%) only make up 13.28% of the fund’s total assets.

VGK’s mid-section with moderate exposure is comprised of Basic Materials, Technology, Consumer Defensive, Consumer Cyclical, and Healthcare stocks at 7.67%, 8.3%, 11.39%, 11.6%, and 13.76%.

XLK is 79.24% more exposed to the Technology sector than VGK (87.54% vs 8.3%). XLK’s exposure to Financial Services and Industrials stocks is 5.14% lower and 13.83% lower respectively (10.71% vs. 15.85% and 1.75% vs. 15.58%). In total, Consumer Cyclical, Real Estate, and Consumer Defensive also make up 25.56% less of the fund’s holdings compared to VGK (0.00% vs. 25.56%).

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%.

VGK - Holdings

VGK Holdings Weight
Nestle SA 2.82%
ASML Holding NV 2.2%
Roche Holding AG 2.13%
LVMH Moet Hennessy Louis Vuitton SE 1.58%
Novartis AG 1.55%
AstraZeneca PLC 1.27%
SAP SE 1.25%
Unilever PLC 1.23%
Novo Nordisk A/S B 1.09%
Siemens AG 0.96%

VGK’s Top Holdings are Nestle SA, ASML Holding NV, Roche Holding AG, LVMH Moet Hennessy Louis Vuitton SE, and Novartis AG at 2.82%, 2.2%, 2.13%, 1.58%, and 1.55%.

AstraZeneca PLC (1.27%), SAP SE (1.25%), and Unilever PLC (1.23%) have a slightly smaller but still significant weight. Novo Nordisk A/S B and Siemens AG are also represented in the VGK’s holdings at 1.09% and 0.96%.

Risk Analysis

XLK VGK
Mean Return 1.7 0.61
R-squared 73.56 92.76
Std. Deviation 15.58 16.65
Alpha 10.43 0.45
Beta 0.95 1.06
Sharpe Ratio 1.27 0.4
Treynor Ratio 21.44 5.12

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

The Vanguard FTSE Europe Index Fund ETF Shares (VGK) has a Alpha of 0.45 with a Beta of 1.06 and a Sharpe Ratio of 0.4. Its R-squared is 92.76 while VGK’s Mean Return is 0.61. Furthermore, the fund has a Standard Deviation of 16.65 and a Treynor Ratio of 5.12.

XLK’s Mean Return is 1.09 points higher than that of VGK and its R-squared is 19.20 points lower. With a Standard Deviation of 15.58, XLK is slightly less volatile than VGK. The Alpha and Beta of XLK are 9.98 points higher and 0.11 points lower than VGK’s Alpha and Beta.

Performance

Annual Returns

XLK vs. VGK - Annual Returns

Year XLK VGK
2020 43.67% 6.5%
2019 49.97% 24.26%
2018 -1.56% -14.79%
2017 34.27% 27.06%
2016 14.81% -0.59%
2015 5.62% -1.87%
2014 17.75% -6.56%
2013 25.98% 24.93%
2012 15.47% 21.01%
2011 2.69% -11.49%
2010 11.6% 5.01%

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 VGK, returning 27.06% on an annual basis. The poorest year for VGK in the last ten years was 2018, with a yield of -14.79%. Most years the Vanguard FTSE Europe Index Fund ETF Shares has given investors modest returns, such as in 2016, 2010, and 2020, when gains were -0.59%, 5.01%, and 6.5% respectively.

Portfolio Growth

XLK vs. VGK - Portfolio Growth

Fund Initial Balance Final Balance CAGR
XLK $10,000 $67,790 20.02%
VGK $10,000 $18,350 6.68%

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 VGK, the end total would have been $18,350. This equates to a $8,350 profit over 11 years and a compound annual growth rate (CAGR) of 6.68%.

XLK’s CAGR is 13.35 percentage points higher than that of VGK and as a result, would have yielded $49,440 more on a $10,000 investment. Thus, XLK outperformed VGK by 13.35% annually.


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