The Technology Select Sector SPDR Fund (XLK) and the Vanguard Real Estate Index Fund ETF Shares (VNQ) are both among the Top 100 ETFs. XLK is a SPDR State Street Global Advisors Technology fund and VNQ is a Vanguard Real Estate fund. So, what’s the difference between XLK and VNQ? And which fund is better?
XLK and VNQ have the same expense ratio: 0.12%. XLK also has a higher exposure to the technology sector and a lower standard deviation. Overall, XLK has provided higher returns than VNQ over the past ten years.
In this article, we’ll compare XLK vs. VNQ. We’ll look at holdings and portfolio growth, as well as at their annual returns and fund composition. Moreover, I’ll also discuss XLK’s and VNQ’s risk metrics, performance, and industry exposure and examine how these affect their overall returns.
|Name||Technology Select Sector SPDR Fund||Vanguard Real Estate Index Fund ETF Shares|
|Issuer||SPDR State Street Global Advisors||Vanguard|
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 Real Estate Index Fund ETF Shares (VNQ) is a Real Estate fund that is issued by Vanguard. It currently has 77.34B total assets under management and has yielded an average annual return of 11.05% over the past 10 years. The fund has a dividend yield of 2.34% with an expense ratio of 0.12%.
XLK’s dividend yield is 1.61% lower than that of VNQ (0.73% vs. 2.34%). Also, XLK yielded on average 8.98% more per year over the past decade (20.02% vs. 11.05%). XLK and VNQ have the same expense ratio: 0.12%.
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 Real Estate Index Fund ETF Shares (VNQ) has the most exposure to the Real Estate sector at 100.0%. This is followed by Technology and Industrials at 0.0% and 0.0% respectively. Consumer Cyclical (0.0%), Financial Services (0.0%), and Consumer Defensive (0.0%) only make up 0.00% of the fund’s total assets.
VNQ’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 0.0%.
XLK is 87.54% more exposed to the Technology sector than VNQ (87.54% vs 0.0%). XLK’s exposure to Financial Services and Industrials stocks is 10.71% higher and 1.75% higher respectively (10.71% vs. 0.0% and 1.75% vs. 0.0%). In total, Consumer Cyclical, Real Estate, and Consumer Defensive also make up 100.00% less of the fund’s holdings compared to VNQ (0.00% vs. 100.00%).
|Visa Inc Class A||3.95%|
|PayPal Holdings Inc||3.42%|
|Mastercard Inc A||3.19%|
|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%.
|Vanguard Real Estate II Index||11.62%|
|American Tower Corp||7.24%|
|Crown Castle International Corp||5.01%|
|Simon Property Group Inc||2.52%|
|Digital Realty Trust Inc||2.49%|
|SBA Communications Corp||2.1%|
VNQ’s Top Holdings are Vanguard Real Estate II Index, American Tower Corp, Prologis Inc, Crown Castle International Corp, and Equinix Inc at 11.62%, 7.24%, 5.33%, 5.01%, and 4.3%.
Public Storage (2.85%), Simon Property Group Inc (2.52%), and Digital Realty Trust Inc (2.49%) have a slightly smaller but still significant weight. SBA Communications Corp and Welltower Inc are also represented in the VNQ’s holdings at 2.1% and 2.09%.
The Technology Select Sector SPDR Fund (XLK) has a Sharpe Ratio of 1.27 with a Standard Deviation of 15.58 and a Beta of 0.95. Its R-squared is 73.56 while XLK’s Alpha is 10.43. Furthermore, the fund has a Mean Return of 1.7 and a Treynor Ratio of 21.44.
The Vanguard Real Estate Index Fund ETF Shares (VNQ) has a Sharpe Ratio of 0.62 with a Alpha of 2.47 and a R-squared of 44.4. Its Standard Deviation is 16.13 while VNQ’s Beta is 0.76. Furthermore, the fund has a Mean Return of 0.89 and a Treynor Ratio of 11.9.
XLK’s Mean Return is 0.81 points higher than that of VNQ and its R-squared is 29.16 points higher. With a Standard Deviation of 15.58, XLK is slightly less volatile than VNQ. The Alpha and Beta of XLK are 7.96 points higher and 0.19 points higher than VNQ’s Alpha and Beta.
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 2014 was the strongest year for VNQ, returning 30.29% on an annual basis. The poorest year for VNQ in the last ten years was 2018, with a yield of -5.95%. Most years the Vanguard Real Estate Index Fund ETF Shares has given investors modest returns, such as in 2017, 2016, and 2011, when gains were 4.95%, 8.53%, and 8.62% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
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 VNQ, the end total would have been $29,506. This equates to a $19,506 profit over 11 years and a compound annual growth rate (CAGR) of 11.05%.
XLK’s CAGR is 8.98 percentage points higher than that of VNQ and as a result, would have yielded $38,284 more on a $10,000 investment. Thus, XLK outperformed VNQ by 8.98% annually.
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