The Health Care Select Sector SPDR Fund (XLV) and the Vanguard Short-Term Inflation-Protected Securities Index Fund ETF Shares (VTIP) are both among the Top 100 ETFs. XLV is a SPDR State Street Global Advisors Health fund and VTIP is a Vanguard Inflation-Protected Bond fund. So, what’s the difference between XLV and VTIP? And which fund is better?
The expense ratio of XLV is 0.07 percentage points higher than VTIP’s (0.12% vs. 0.05%). XLV also has a high exposure to the healthcare sector while VTIP is mostly comprised of AAA bonds. Overall, XLV has provided higher returns than VTIP over the past ten years.
In this article, we’ll compare XLV vs. VTIP. We’ll look at performance and industry exposure, as well as at their holdings and risk metrics. Moreover, I’ll also discuss XLV’s and VTIP’s annual returns, fund composition, and portfolio growth and examine how these affect their overall returns.
Summary
| XLV | VTIP | |
| Name | Health Care Select Sector SPDR Fund | Vanguard Short-Term Inflation-Protected Securities Index Fund ETF Shares |
| Category | Health | Inflation-Protected Bond |
| Issuer | SPDR State Street Global Advisors | Vanguard |
| AUM | 27.88B | 50.67B |
| Avg. Return | 15.02% | 1.79% |
| Div. Yield | 1.4% | 1.35% |
| Expense Ratio | 0.12% | 0.05% |
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 Short-Term Inflation-Protected Securities Index Fund ETF Shares (VTIP) is a Inflation-Protected Bond fund that is issued by Vanguard. It currently has 50.67B total assets under management and has yielded an average annual return of 1.79% over the past 10 years. The fund has a dividend yield of 1.35% with an expense ratio of 0.05%.
XLV’s dividend yield is 0.05% higher than that of VTIP (1.4% vs. 1.35%). Also, XLV yielded on average 13.23% more per year over the past decade (15.02% vs. 1.79%). The expense ratio of XLV is 0.07 percentage points higher than VTIP’s (0.12% vs. 0.05%).
Fund Composition
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%.
| VTIP Bond Sectors | Weight |
| AAA | 99.87% |
| Others | 0.13% |
| Below B | 0.0% |
| B | 0.0% |
| BB | 0.0% |
| BBB | 0.0% |
| A | 0.0% |
| AA | 0.0% |
| US Government | 0.0% |
VTIP’s Top Bond Sectors are ratings of AAA, Others, Below B, B, and BB at 99.87%, 0.13%, 0.0%, 0.0%, and 0.0%. The fund is less weighted towards BBB (0.0%), A (0.0%), and AA (0.0%) rated bonds.
Risk Analysis
| XLV | VTIP | |
| Mean Return | 1.27 | 0 |
| R-squared | 58.19 | 0 |
| Std. Deviation | 12.94 | 0 |
| Alpha | 7.75 | 0 |
| Beta | 0.7 | 0 |
| Sharpe Ratio | 1.13 | 0 |
| Treynor Ratio | 21.1 | 0 |
The Health Care Select Sector SPDR Fund (XLV) has a Mean Return of 1.27 with a Treynor Ratio of 21.1 and a Sharpe Ratio of 1.13. Its Alpha is 7.75 while XLV’s R-squared is 58.19. Furthermore, the fund has a Beta of 0.7 and a Standard Deviation of 12.94.
The Vanguard Short-Term Inflation-Protected Securities Index Fund ETF Shares (VTIP) has a Beta of 0 with a Mean Return of 0 and a Sharpe Ratio of 0. Its Standard Deviation is 0 while VTIP’s Alpha is 0. Furthermore, the fund has a R-squared of 0 and a Treynor Ratio of 0.
XLV’s Mean Return is 1.27 points higher than that of VTIP and its R-squared is 58.19 points higher. With a Standard Deviation of 12.94, XLV is slightly more volatile than VTIP. The Alpha and Beta of XLV are 7.75 points higher and 0.70 points higher than VTIP’s Alpha and Beta.
Performance
Annual Returns
| Year | XLV | VTIP |
| 2020 | 13.33% | 4.97% |
| 2019 | 20.63% | 4.83% |
| 2018 | 6.3% | 0.54% |
| 2017 | 21.7% | 0.82% |
| 2016 | -2.83% | 2.71% |
| 2015 | 6.82% | -0.15% |
| 2014 | 25.17% | -1.17% |
| 2013 | 41.24% | -1.55% |
| 2012 | 17.56% | 0.0% |
| 2011 | 12.44% | 0.0% |
| 2010 | 2.91% | 0.0% |
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 2020 was the strongest year for VTIP, returning 4.97% on an annual basis. The poorest year for VTIP in the last ten years was 2013, with a yield of -1.55%. Most years the Vanguard Short-Term Inflation-Protected Securities Index Fund ETF Shares has given investors modest returns, such as in 2011, 2010, and 2018, when gains were 0.0%, 0.0%, and 0.54% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| XLV | $10,000 | $22,977 | 15.02% |
| VTIP | $10,000 | $11,305 | 1.79% |
A $10,000 investment in XLV would have resulted in a final balance of $22,977. This is a profit of $12,977 over 7 years and amounts to a compound annual growth rate (CAGR) of 15.02%.
With a $10,000 investment in VTIP, the end total would have been $11,305. This equates to a $1,305 profit over 7 years and a compound annual growth rate (CAGR) of 1.79%.
XLV’s CAGR is 13.23 percentage points higher than that of VTIP and as a result, would have yielded $11,672 more on a $10,000 investment. Thus, XLV outperformed VTIP by 13.23% annually.
Current recommendations:
Over the past years, I have discovered several tools and products that have helped me tremendously on my path to financial freedom:
P.S.: The links below are affiliate links, which means I receive a small commission at no extra cost to you when you sign up for one of the services. Thank you for your support!
1)Personal Capital is simply the best tool out there to track your net worth and plan for financial freedom. Just their retirement planner alone has become an invaluable tool to keep myself on track financially. Try it out, it's free!
2) Take a look at M1 Finance, my favorite broker. I love how easy it is to invest and maintain my portfolio with them. I can set up automatic transfers, rebalance my portfolio with one click and even borrow up to 35% of my assets at super low interest rates!
3) Fundrise is by far the best way I've found to invest in Real Estate. You can diversify your portfolio by investing in their eREITs or even allocate capital to individual properties (without the hassle of managing tenants!).
4) Groundfloor is another great way to get exposure to the real estate sector by investing in short-term, high-yield real estate debt. Current returns are >10% and you can get started with just $10.
5) If you are interested in startup investing, check out Mainvest. I've started allocating a small amount of assets to invest in and support small businesses. Return targets are between 10-25% and you can start with just $100!
To see all of my most up-to-date recommendations, check out the Recommended Tools section.
I believe that money is just a means to an end: to be free to spend your time as you wish, to maximize your positive impact on the world.
