XLV vs. VHT: What’s The Difference?

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

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

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

Summary

XLV VHT
Name Health Care Select Sector SPDR Fund Vanguard Health Care Index Fund ETF Shares
Category Health Health
Issuer SPDR State Street Global Advisors Vanguard
AUM 27.88B 17.94B
Avg. Return 15.02% 16.04%
Div. Yield 1.4% 1.15%
Expense Ratio 0.12% 0.1%

The Health Care Select Sector SPDR Fund (XLV) is a Health fund that is issued by SPDR State Street Global Advisors. It currently has 27.88B total assets under management and has yielded an average annual return of 15.02% over the past 10 years. The fund has a dividend yield of 1.4% 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%.

XLV’s dividend yield is 0.25% higher than that of VHT (1.4% vs. 1.15%). Also, XLV yielded on average 1.01% less per year over the past decade (15.02% vs. 16.04%). The expense ratio of XLV is 0.02 percentage points higher than VHT’s (0.12% vs. 0.1%).

Fund Composition

Industry Exposure

XLV vs. VHT - Industry Exposure

XLV VHT
Technology 0.0% 0.05%
Industrials 0.0% 0.05%
Energy 0.0% 0.0%
Communication Services 0.0% 0.0%
Utilities 0.0% 0.0%
Healthcare 100.0% 99.57%
Consumer Defensive 0.0% 0.0%
Real Estate 0.0% 0.0%
Financial Services 0.0% 0.02%
Consumer Cyclical 0.0% 0.0%
Basic Materials 0.0% 0.31%

The Health Care Select Sector SPDR Fund (XLV) has the most exposure to the Healthcare 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 Real Estate (0.0%) only make up 0.00% of the fund’s total assets.

XLV’s mid-section with moderate exposure is comprised of Consumer Defensive, Utilities, Communication Services, Energy, and Industrials stocks at 0.0%, 0.0%, 0.0%, 0.0%, and 0.0%.

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%.

XLV is 0.43% more exposed to the Healthcare sector than VHT (100.0% vs 99.57%). XLV’s exposure to Technology and Industrials stocks is 0.05% lower and 0.05% lower respectively (0.0% vs. 0.05% and 0.0% vs. 0.05%). In total, Consumer Cyclical, Financial Services, and Real Estate also make up 0.02% less of the fund’s holdings compared to VHT (0.00% vs. 0.02%).

Holdings

XLV - Holdings

XLV Holdings Weight
Johnson & Johnson 9.19%
UnitedHealth Group Inc 8.01%
Pfizer Inc 4.64%
Abbott Laboratories 4.36%
AbbVie Inc 4.21%
Thermo Fisher Scientific Inc 4.2%
Merck & Co Inc 4.17%
Eli Lilly and Co 3.87%
Danaher Corp 3.61%
Medtronic PLC 3.54%

XLV’s Top Holdings are Johnson & Johnson, UnitedHealth Group Inc, Pfizer Inc, Abbott Laboratories, and AbbVie Inc at 9.19%, 8.01%, 4.64%, 4.36%, and 4.21%.

Thermo Fisher Scientific Inc (4.2%), Merck & Co Inc (4.17%), and Eli Lilly and Co (3.87%) have a slightly smaller but still significant weight. Danaher Corp and Medtronic PLC are also represented in the XLV’s holdings at 3.61% and 3.54%.

VHT - Holdings

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%.

Risk Analysis

XLV VHT
Mean Return 1.27 1.33
R-squared 58.19 59.86
Std. Deviation 12.94 13.58
Alpha 7.75 7.99
Beta 0.7 0.75
Sharpe Ratio 1.13 1.13
Treynor Ratio 21.1 20.74

The Health Care Select Sector SPDR Fund (XLV) has a Sharpe Ratio of 1.13 with a Beta of 0.7 and a Mean Return of 1.27. Its Alpha is 7.75 while XLV’s R-squared is 58.19. Furthermore, the fund has a Treynor Ratio of 21.1 and a Standard Deviation of 12.94.

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

XLV’s Mean Return is 0.06 points lower than that of VHT and its R-squared is 1.67 points lower. With a Standard Deviation of 12.94, XLV is slightly less volatile than VHT. The Alpha and Beta of XLV are 0.24 points lower and 0.05 points lower than VHT’s Alpha and Beta.

Performance

Annual Returns

XLV vs. VHT - Annual Returns

Year XLV VHT
2020 13.33% 18.21%
2019 20.63% 21.97%
2018 6.3% 5.55%
2017 21.7% 23.34%
2016 -2.83% -3.33%
2015 6.82% 7.22%
2014 25.17% 25.38%
2013 41.24% 42.67%
2012 17.56% 19.1%
2011 12.44% 10.57%
2010 2.91% 5.75%

XLV had its best year in 2013 with an annual return of 41.24%. XLV’s worst year over the past decade yielded -2.83% and occurred in 2016. In most years the Health Care Select Sector SPDR Fund provided moderate returns such as in 2011, 2020, and 2012 where annual returns amounted to 12.44%, 13.33%, and 17.56% 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

XLV vs. VHT - Portfolio Growth

Fund Initial Balance Final Balance CAGR
XLV $10,000 $44,147 15.02%
VHT $10,000 $48,464 16.04%

A $10,000 investment in XLV would have resulted in a final balance of $44,147. This is a profit of $34,147 over 11 years and amounts to a compound annual growth rate (CAGR) of 15.02%.

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%.

XLV’s CAGR is 1.01 percentage points lower than that of VHT and as a result, would have yielded $4,317 less on a $10,000 investment. Thus, XLV performed worse than VHT by 1.01% annually.


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