Skip to content

XLK vs. VHT: What’s The Difference?

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

The expense ratio of XLK is 0.02 percentage points higher than VHT’s (0.12% vs. 0.1%). XLK also has a higher exposure to the technology sector and a higher standard deviation. Overall, XLK has provided higher returns than VHT over the past ten years.

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

TIP: Keep track of all your investments with Personal Capital. I use this amazing tool to aggregate all investments in one place and make sure I'm on track to financial freedom. Oh, and did I mention it's free? Try it out here (link to Personal Capital).

Summary

XLKVHT
NameTechnology Select Sector SPDR FundVanguard Health Care Index Fund ETF Shares
CategoryTechnologyHealth
IssuerSPDR State Street Global AdvisorsVanguard
AUM42.3B17.94B
Avg. Return20.02%16.04%
Div. Yield0.73%1.15%
Expense Ratio0.12%0.1%

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 Health Care Index Fund ETF Shares (VHT) is a Health fund that is issued by Vanguard. It currently has 17.94B total assets under management and has yielded an average annual return of 16.04% over the past 10 years. The fund has a dividend yield of 1.15% with an expense ratio of 0.1%.

XLK’s dividend yield is 0.42% lower than that of VHT (0.73% vs. 1.15%). Also, XLK yielded on average 3.99% more per year over the past decade (20.02% vs. 16.04%). The expense ratio of XLK is 0.02 percentage points higher than VHT’s (0.12% vs. 0.1%).

FYI: The best way I've found to invest in ETFs is through M1 Finance. It's free and you even get an instant line of credit! Have a look here (link to M1 Finance).

Fund Composition

Industry Exposure

XLK vs. VHT - Industry Exposure

XLKVHT
Technology87.54%0.05%
Industrials1.75%0.05%
Energy0.0%0.0%
Communication Services0.0%0.0%
Utilities0.0%0.0%
Healthcare0.0%99.57%
Consumer Defensive0.0%0.0%
Real Estate0.0%0.0%
Financial Services10.71%0.02%
Consumer Cyclical0.0%0.0%
Basic Materials0.0%0.31%

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 Health Care Index Fund ETF Shares (VHT) has the most exposure to the Healthcare sector at 99.57%. This is followed by Basic Materials and Technology at 0.31% and 0.05% respectively. Real Estate (0.0%), Consumer Defensive (0.0%), and Utilities (0.0%) only make up 0.00% of the fund’s total assets.

VHT’s mid-section with moderate exposure is comprised of Communication Services, Energy, Financial Services, Industrials, and Technology stocks at 0.0%, 0.0%, 0.02%, 0.05%, and 0.05%.

XLK is 87.49% more exposed to the Technology sector than VHT (87.54% vs 0.05%). XLK’s exposure to Financial Services and Industrials stocks is 10.69% higher and 1.70% higher respectively (10.71% vs. 0.02% and 1.75% vs. 0.05%). In total, Consumer Cyclical, Real Estate, and Consumer Defensive also make up 0.00% less of the fund’s holdings compared to VHT (0.00% vs. 0.00%).

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%.

VHT - Holdings

VHT HoldingsWeight
Johnson & Johnson7.34%
UnitedHealth Group Inc6.44%
Pfizer Inc3.7%
Abbott Laboratories3.48%
Thermo Fisher Scientific Inc3.37%
AbbVie Inc3.37%
Merck & Co Inc3.33%
Eli Lilly and Co3.17%
Danaher Corp2.91%
Medtronic PLC2.83%

VHT’s Top Holdings are Johnson & Johnson, UnitedHealth Group Inc, Pfizer Inc, Abbott Laboratories, and Thermo Fisher Scientific Inc at 7.34%, 6.44%, 3.7%, 3.48%, and 3.37%.

AbbVie Inc (3.37%), Merck & Co Inc (3.33%), and Eli Lilly and Co (3.17%) have a slightly smaller but still significant weight. Danaher Corp and Medtronic PLC are also represented in the VHT’s holdings at 2.91% and 2.83%.

NOTE: The easiest way to add diversification to your portfolio is to invest in real estate through Fundrise. You can become private real estate investor without the burden of property management! Check it out here (link to Fundrise).

Risk Analysis

XLKVHT
Mean Return1.71.33
R-squared73.5659.86
Std. Deviation15.5813.58
Alpha10.437.99
Beta0.950.75
Sharpe Ratio1.271.13
Treynor Ratio21.4420.74

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

The Vanguard Health Care Index Fund ETF Shares (VHT) has a Standard Deviation of 13.58 with a Alpha of 7.99 and a Mean Return of 1.33. Its Sharpe Ratio is 1.13 while VHT’s Treynor Ratio is 20.74. Furthermore, the fund has a R-squared of 59.86 and a Beta of 0.75.

XLK’s Mean Return is 0.37 points higher than that of VHT and its R-squared is 13.70 points higher. With a Standard Deviation of 15.58, XLK is slightly more volatile than VHT. The Alpha and Beta of XLK are 2.44 points higher and 0.20 points higher than VHT’s Alpha and Beta.

FYI: Another great way to get exposure to the real estate sector is by investing in real estate debt. Groundfloor offers fantastic short-term, high-yield bonds that can add diversification to your portfolio!

Performance

Annual Returns

XLK vs. VHT - Annual Returns

YearXLKVHT
202043.67%18.21%
201949.97%21.97%
2018-1.56%5.55%
201734.27%23.34%
201614.81%-3.33%
20155.62%7.22%
201417.75%25.38%
201325.98%42.67%
201215.47%19.1%
20112.69%10.57%
201011.6%5.75%

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 VHT, returning 42.67% on an annual basis. The poorest year for VHT in the last ten years was 2016, with a yield of -3.33%. Most years the Vanguard Health Care Index Fund ETF Shares has given investors modest returns, such as in 2011, 2020, and 2012, when gains were 10.57%, 18.21%, and 19.1% respectively.

Portfolio Growth

XLK vs. VHT - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
XLK$10,000$67,79020.02%
VHT$10,000$48,46416.04%

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 VHT, the end total would have been $48,464. This equates to a $38,464 profit over 11 years and a compound annual growth rate (CAGR) of 16.04%.

XLK’s CAGR is 3.99 percentage points higher than that of VHT and as a result, would have yielded $19,326 more on a $10,000 investment. Thus, XLK outperformed VHT by 3.99% 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)Personal Capital is simply the best tool out there to track your net worth and plan for financial freedom. Just their retirement planner alone has become an invaluable tool to keep myself on track financially. Try it out, it's free!

2) 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!

3) 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!).

4) Groundfloor is another great way to get exposure to the real estate sector by investing in short-term, high-yield real estate debt. Current returns are >10% and you can get started with just $10.

5) If you are interested in startup investing, check out Mainvest. I've started allocating a small amount of assets to invest in and support small businesses. Return targets are between 10-25% and you can start with just $100!

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

Leave a Reply

Your email address will not be published.