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XLK vs. VXF: What’s The Difference?

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

The expense ratio of XLK is 0.06 percentage points higher than VXF’s (0.12% vs. 0.06%). XLK also has a higher exposure to the technology sector and a lower standard deviation. Overall, XLK has provided higher returns than VXF over the past ten years.

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

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Summary

XLKVXF
NameTechnology Select Sector SPDR FundVanguard Extended Market Index Fund ETF Shares
CategoryTechnologyMid-Cap Growth
IssuerSPDR State Street Global AdvisorsVanguard
AUM42.3B114.53B
Avg. Return20.02%15.47%
Div. Yield0.73%1.19%
Expense Ratio0.12%0.06%

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 Extended Market Index Fund ETF Shares (VXF) is a Mid-Cap Growth fund that is issued by Vanguard. It currently has 114.53B total assets under management and has yielded an average annual return of 15.47% over the past 10 years. The fund has a dividend yield of 1.19% with an expense ratio of 0.06%.

XLK’s dividend yield is 0.46% lower than that of VXF (0.73% vs. 1.19%). Also, XLK yielded on average 4.55% more per year over the past decade (20.02% vs. 15.47%). The expense ratio of XLK is 0.06 percentage points higher than VXF’s (0.12% vs. 0.06%).

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Fund Composition

Industry Exposure

XLK vs. VXF - Industry Exposure

XLKVXF
Technology87.54%23.61%
Industrials1.75%11.31%
Energy0.0%2.46%
Communication Services0.0%7.29%
Utilities0.0%1.65%
Healthcare0.0%15.25%
Consumer Defensive0.0%3.09%
Real Estate0.0%8.16%
Financial Services10.71%12.56%
Consumer Cyclical0.0%11.35%
Basic Materials0.0%3.26%

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 Extended Market Index Fund ETF Shares (VXF) has the most exposure to the Technology sector at 23.61%. This is followed by Healthcare and Financial Services at 15.25% and 12.56% respectively. Energy (2.46%), Consumer Defensive (3.09%), and Basic Materials (3.26%) only make up 8.81% of the fund’s total assets.

VXF’s mid-section with moderate exposure is comprised of Communication Services, Real Estate, Industrials, Consumer Cyclical, and Financial Services stocks at 7.29%, 8.16%, 11.31%, 11.35%, and 12.56%.

XLK is 63.93% more exposed to the Technology sector than VXF (87.54% vs 23.61%). XLK’s exposure to Financial Services and Industrials stocks is 1.85% lower and 9.56% lower respectively (10.71% vs. 12.56% and 1.75% vs. 11.31%). In total, Consumer Cyclical, Real Estate, and Consumer Defensive also make up 22.60% less of the fund’s holdings compared to VXF (0.00% vs. 22.60%).

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%.

VXF - Holdings

VXF HoldingsWeight
Square Inc A1.2%
Zoom Video Communications Inc1.04%
Uber Technologies Inc0.93%
Moderna Inc0.9%
Blackstone Group Inc0.83%
Snap Inc Class A0.8%
Twilio Inc A0.73%
DocuSign Inc0.68%
CrowdStrike Holdings Inc Class A0.63%
Marvell Technology Inc0.6%

VXF’s Top Holdings are Square Inc A, Zoom Video Communications Inc, Uber Technologies Inc, Moderna Inc, and Blackstone Group Inc at 1.2%, 1.04%, 0.93%, 0.9%, and 0.83%.

Snap Inc Class A (0.8%), Twilio Inc A (0.73%), and DocuSign Inc (0.68%) have a slightly smaller but still significant weight. CrowdStrike Holdings Inc Class A and Marvell Technology Inc are also represented in the VXF’s holdings at 0.63% and 0.6%.

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Risk Analysis

XLKVXF
Mean Return1.71.24
R-squared73.5685.73
Std. Deviation15.5818.04
Alpha10.43-3.26
Beta0.951.23
Sharpe Ratio1.270.79
Treynor Ratio21.4410.92

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

The Vanguard Extended Market Index Fund ETF Shares (VXF) has a R-squared of 85.73 with a Standard Deviation of 18.04 and a Beta of 1.23. Its Mean Return is 1.24 while VXF’s Alpha is -3.26. Furthermore, the fund has a Sharpe Ratio of 0.79 and a Treynor Ratio of 10.92.

XLK’s Mean Return is 0.46 points higher than that of VXF and its R-squared is 12.17 points lower. With a Standard Deviation of 15.58, XLK is slightly less volatile than VXF. The Alpha and Beta of XLK are 13.69 points higher and 0.28 points lower than VXF’s Alpha and Beta.

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Performance

Annual Returns

XLK vs. VXF - Annual Returns

YearXLKVXF
202043.67%32.19%
201949.97%28.04%
2018-1.56%-9.37%
201734.27%18.1%
201614.81%16.16%
20155.62%-3.26%
201417.75%7.55%
201325.98%38.37%
201215.47%18.48%
20112.69%-3.61%
201011.6%27.55%

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 VXF, returning 38.37% on an annual basis. The poorest year for VXF in the last ten years was 2018, with a yield of -9.37%. Most years the Vanguard Extended Market Index Fund ETF Shares has given investors modest returns, such as in 2016, 2017, and 2012, when gains were 16.16%, 18.1%, and 18.48% respectively.

Portfolio Growth

XLK vs. VXF - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
XLK$10,000$67,79020.02%
VXF$10,000$44,13015.47%

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 VXF, the end total would have been $44,130. This equates to a $34,130 profit over 11 years and a compound annual growth rate (CAGR) of 15.47%.

XLK’s CAGR is 4.55 percentage points higher than that of VXF and as a result, would have yielded $23,660 more on a $10,000 investment. Thus, XLK outperformed VXF by 4.55% annually.


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