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.
Summary
| XLK | VHT | |
| Name | Technology Select Sector SPDR Fund | Vanguard Health Care Index Fund ETF Shares |
| Category | Technology | Health |
| Issuer | SPDR State Street Global Advisors | Vanguard |
| AUM | 42.3B | 17.94B |
| Avg. Return | 20.02% | 16.04% |
| Div. Yield | 0.73% | 1.15% |
| Expense Ratio | 0.12% | 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%).
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Fund Composition
Industry Exposure
| XLK | VHT | |
| Technology | 87.54% | 0.05% |
| Industrials | 1.75% | 0.05% |
| Energy | 0.0% | 0.0% |
| Communication Services | 0.0% | 0.0% |
| Utilities | 0.0% | 0.0% |
| Healthcare | 0.0% | 99.57% |
| Consumer Defensive | 0.0% | 0.0% |
| Real Estate | 0.0% | 0.0% |
| Financial Services | 10.71% | 0.02% |
| Consumer Cyclical | 0.0% | 0.0% |
| Basic Materials | 0.0% | 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 | 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%.
| VHT Holdings | Weight |
| Johnson & Johnson | 7.34% |
| UnitedHealth Group Inc | 6.44% |
| Pfizer Inc | 3.7% |
| Abbott Laboratories | 3.48% |
| Thermo Fisher Scientific Inc | 3.37% |
| AbbVie Inc | 3.37% |
| Merck & Co Inc | 3.33% |
| Eli Lilly and Co | 3.17% |
| Danaher Corp | 2.91% |
| Medtronic PLC | 2.83% |
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%.
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Risk Analysis
| XLK | VHT | |
| Mean Return | 1.7 | 1.33 |
| R-squared | 73.56 | 59.86 |
| Std. Deviation | 15.58 | 13.58 |
| Alpha | 10.43 | 7.99 |
| Beta | 0.95 | 0.75 |
| Sharpe Ratio | 1.27 | 1.13 |
| Treynor Ratio | 21.44 | 20.74 |
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.
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Performance
Annual Returns
| Year | XLK | VHT |
| 2020 | 43.67% | 18.21% |
| 2019 | 49.97% | 21.97% |
| 2018 | -1.56% | 5.55% |
| 2017 | 34.27% | 23.34% |
| 2016 | 14.81% | -3.33% |
| 2015 | 5.62% | 7.22% |
| 2014 | 17.75% | 25.38% |
| 2013 | 25.98% | 42.67% |
| 2012 | 15.47% | 19.1% |
| 2011 | 2.69% | 10.57% |
| 2010 | 11.6% | 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
| Fund | Initial Balance | Final Balance | CAGR |
| XLK | $10,000 | $67,790 | 20.02% |
| VHT | $10,000 | $48,464 | 16.04% |
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.
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