XLK vs. VYM: What’s The Difference?

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

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

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

Summary

XLK VYM
Name Technology Select Sector SPDR Fund Vanguard High Dividend Yield Index Fund ETF Shares
Category Technology Large Value
Issuer SPDR State Street Global Advisors Vanguard
AUM 42.3B 48.5B
Avg. Return 20.02% 12.20%
Div. Yield 0.73% 2.79%
Expense Ratio 0.12% 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 High Dividend Yield Index Fund ETF Shares (VYM) is a Large Value fund that is issued by Vanguard. It currently has 48.5B total assets under management and has yielded an average annual return of 12.20% over the past 10 years. The fund has a dividend yield of 2.79% with an expense ratio of 0.06%.

XLK’s dividend yield is 2.06% lower than that of VYM (0.73% vs. 2.79%). Also, XLK yielded on average 7.83% more per year over the past decade (20.02% vs. 12.20%). The expense ratio of XLK is 0.06 percentage points higher than VYM’s (0.12% vs. 0.06%).

Fund Composition

Industry Exposure

XLK vs. VYM - Industry Exposure

XLK VYM
Technology 87.54% 9.77%
Industrials 1.75% 10.14%
Energy 0.0% 7.12%
Communication Services 0.0% 5.91%
Utilities 0.0% 7.27%
Healthcare 0.0% 13.61%
Consumer Defensive 0.0% 14.13%
Real Estate 0.0% 0.02%
Financial Services 10.71% 22.05%
Consumer Cyclical 0.0% 5.57%
Basic Materials 0.0% 4.41%

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 High Dividend Yield Index Fund ETF Shares (VYM) has the most exposure to the Financial Services sector at 22.05%. This is followed by Consumer Defensive and Healthcare at 14.13% and 13.61% respectively. Basic Materials (4.41%), Consumer Cyclical (5.57%), and Communication Services (5.91%) only make up 15.89% of the fund’s total assets.

VYM’s mid-section with moderate exposure is comprised of Energy, Utilities, Technology, Industrials, and Healthcare stocks at 7.12%, 7.27%, 9.77%, 10.14%, and 13.61%.

XLK is 77.77% more exposed to the Technology sector than VYM (87.54% vs 9.77%). XLK’s exposure to Financial Services and Industrials stocks is 11.34% lower and 8.39% lower respectively (10.71% vs. 22.05% and 1.75% vs. 10.14%). In total, Consumer Cyclical, Real Estate, and Consumer Defensive also make up 19.72% less of the fund’s holdings compared to VYM (0.00% vs. 19.72%).

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%.

VYM - Holdings

VYM Holdings Weight
JPMorgan Chase & Co 3.53%
Johnson & Johnson 3.28%
The Home Depot Inc 2.59%
Procter & Gamble Co 2.48%
Bank of America Corp 2.35%
Exxon Mobil Corp 2.02%
Comcast Corp Class A 1.96%
Verizon Communications Inc 1.75%
Intel Corp 1.71%
Cisco Systems Inc 1.69%

VYM’s Top Holdings are JPMorgan Chase & Co, Johnson & Johnson, The Home Depot Inc, Procter & Gamble Co, and Bank of America Corp at 3.53%, 3.28%, 2.59%, 2.48%, and 2.35%.

Exxon Mobil Corp (2.02%), Comcast Corp Class A (1.96%), and Verizon Communications Inc (1.75%) have a slightly smaller but still significant weight. Intel Corp and Cisco Systems Inc are also represented in the VYM’s holdings at 1.71% and 1.69%.

Risk Analysis

XLK VYM
Mean Return 1.7 1.04
R-squared 73.56 88.88
Std. Deviation 15.58 12.69
Alpha 10.43 -0.7
Beta 0.95 0.88
Sharpe Ratio 1.27 0.93
Treynor Ratio 21.44 13.24

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

The Vanguard High Dividend Yield Index Fund ETF Shares (VYM) has a Alpha of -0.7 with a Treynor Ratio of 13.24 and a Mean Return of 1.04. Its Sharpe Ratio is 0.93 while VYM’s Beta is 0.88. Furthermore, the fund has a Standard Deviation of 12.69 and a R-squared of 88.88.

XLK’s Mean Return is 0.66 points higher than that of VYM and its R-squared is 15.32 points lower. With a Standard Deviation of 15.58, XLK is slightly more volatile than VYM. The Alpha and Beta of XLK are 11.13 points higher and 0.07 points higher than VYM’s Alpha and Beta.

Performance

Annual Returns

XLK vs. VYM - Annual Returns

Year XLK VYM
2020 43.67% 1.14%
2019 49.97% 24.2%
2018 -1.56% -5.87%
2017 34.27% 16.42%
2016 14.81% 16.87%
2015 5.62% 0.33%
2014 17.75% 13.47%
2013 25.98% 30.26%
2012 15.47% 12.68%
2011 2.69% 10.5%
2010 11.6% 14.17%

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 VYM, returning 30.26% on an annual basis. The poorest year for VYM in the last ten years was 2018, with a yield of -5.87%. Most years the Vanguard High Dividend Yield Index Fund ETF Shares has given investors modest returns, such as in 2012, 2014, and 2010, when gains were 12.68%, 13.47%, and 14.17% respectively.

Portfolio Growth

XLK vs. VYM - Portfolio Growth

Fund Initial Balance Final Balance CAGR
XLK $10,000 $67,790 20.02%
VYM $10,000 $33,914 12.20%

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 VYM, the end total would have been $33,914. This equates to a $23,914 profit over 11 years and a compound annual growth rate (CAGR) of 12.20%.

XLK’s CAGR is 7.83 percentage points higher than that of VYM and as a result, would have yielded $33,876 more on a $10,000 investment. Thus, XLK outperformed VYM by 7.83% annually.


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