XLY vs. VBK: What’s The Difference?

The Consumer Discretionary Select Sector SPDR Fund (XLY) and the Vanguard Small-Cap Growth Index Fund ETF Shares (VBK) are both among the Top 100 ETFs. XLY is a SPDR State Street Global Advisors Consumer Cyclical fund and VBK is a Vanguard Small Growth fund. So, what’s the difference between XLY and VBK? And which fund is better?

The expense ratio of XLY is 0.05 percentage points higher than VBK’s (0.12% vs. 0.07%). XLY also has a higher exposure to the consumer cyclical sector and a lower standard deviation. Overall, XLY has provided higher returns than VBK over the past 11 years.

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

Summary

XLY VBK
Name Consumer Discretionary Select Sector SPDR Fund Vanguard Small-Cap Growth Index Fund ETF Shares
Category Consumer Cyclical Small Growth
Issuer SPDR State Street Global Advisors Vanguard
AUM 20.21B 37.89B
Avg. Return 18.86% 16.53%
Div. Yield 0.63% 0.45%
Expense Ratio 0.12% 0.07%

The Consumer Discretionary Select Sector SPDR Fund (XLY) is a Consumer Cyclical fund that is issued by SPDR State Street Global Advisors. It currently has 20.21B total assets under management and has yielded an average annual return of 18.86% over the past 10 years. The fund has a dividend yield of 0.63% with an expense ratio of 0.12%.

The Vanguard Small-Cap Growth Index Fund ETF Shares (VBK) is a Small Growth fund that is issued by Vanguard. It currently has 37.89B total assets under management and has yielded an average annual return of 16.53% over the past 10 years. The fund has a dividend yield of 0.45% with an expense ratio of 0.07%.

XLY’s dividend yield is 0.18% higher than that of VBK (0.63% vs. 0.45%). Also, XLY yielded on average 2.34% more per year over the past decade (18.86% vs. 16.53%). The expense ratio of XLY is 0.05 percentage points higher than VBK’s (0.12% vs. 0.07%).

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Fund Composition

Industry Exposure

XLY vs. VBK - Industry Exposure

XLY VBK
Technology 0.57% 27.87%
Industrials 0.0% 13.19%
Energy 0.0% 1.77%
Communication Services 0.0% 3.24%
Utilities 0.0% 0.32%
Healthcare 0.0% 23.24%
Consumer Defensive 5.34% 3.83%
Real Estate 0.0% 7.87%
Financial Services 0.0% 4.05%
Consumer Cyclical 94.1% 12.13%
Basic Materials 0.0% 2.49%

The Consumer Discretionary Select Sector SPDR Fund (XLY) has the most exposure to the Consumer Cyclical sector at 94.1%. This is followed by Consumer Defensive and Technology at 5.34% and 0.57% respectively. Financial Services (0.0%), Real Estate (0.0%), and Healthcare (0.0%) only make up 0.00% of the fund’s total assets.

XLY’s mid-section with moderate exposure is comprised of Utilities, Communication Services, Energy, Industrials, and Technology stocks at 0.0%, 0.0%, 0.0%, 0.0%, and 0.57%.

The Vanguard Small-Cap Growth Index Fund ETF Shares (VBK) has the most exposure to the Technology sector at 27.87%. This is followed by Healthcare and Industrials at 23.24% and 13.19% respectively. Energy (1.77%), Basic Materials (2.49%), and Communication Services (3.24%) only make up 7.50% of the fund’s total assets.

VBK’s mid-section with moderate exposure is comprised of Consumer Defensive, Financial Services, Real Estate, Consumer Cyclical, and Industrials stocks at 3.83%, 4.05%, 7.87%, 12.13%, and 13.19%.

XLY is 81.97% more exposed to the Consumer Cyclical sector than VBK (94.1% vs 12.13%). XLY’s exposure to Consumer Defensive and Technology stocks is 1.51% higher and 27.30% lower respectively (5.34% vs. 3.83% and 0.57% vs. 27.87%). In total, Financial Services, Real Estate, and Healthcare also make up 35.16% less of the fund’s holdings compared to VBK (0.00% vs. 35.16%).

Holdings

XLY - Holdings

XLY Holdings Weight
Amazon.com Inc 22.9%
Tesla Inc 13.5%
The Home Depot Inc 8.74%
McDonald’s Corp 4.5%
Nike Inc B 4.45%
Lowe’s Companies Inc 3.58%
Starbucks Corp 3.44%
Target Corp 3.12%
Booking Holdings Inc 2.35%
TJX Companies Inc 2.12%

XLY’s Top Holdings are Amazon.com Inc, Tesla Inc, The Home Depot Inc, McDonald’s Corp, and Nike Inc B at 22.9%, 13.5%, 8.74%, 4.5%, and 4.45%.

Lowe’s Companies Inc (3.58%), Starbucks Corp (3.44%), and Target Corp (3.12%) have a slightly smaller but still significant weight. Booking Holdings Inc and TJX Companies Inc are also represented in the XLY’s holdings at 2.35% and 2.12%.

VBK - Holdings

VBK Holdings Weight
Charles River Laboratories International Inc 0.78%
Pool Corp 0.73%
Bio-Techne Corp 0.73%
Avantor Inc 0.73%
PerkinElmer Inc 0.72%
Entegris Inc 0.7%
PTC Inc 0.62%
Fair Isaac Corp 0.57%
Bill.com Holdings Inc Ordinary Shares 0.56%
Avalara Inc 0.55%

VBK’s Top Holdings are Charles River Laboratories International Inc, Pool Corp, Bio-Techne Corp, Avantor Inc, and PerkinElmer Inc at 0.78%, 0.73%, 0.73%, 0.73%, and 0.72%.

Entegris Inc (0.7%), PTC Inc (0.62%), and Fair Isaac Corp (0.57%) have a slightly smaller but still significant weight. Bill.com Holdings Inc Ordinary Shares and Avalara Inc are also represented in the VBK’s holdings at 0.56% and 0.55%.

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Risk Analysis

XLY VBK
Mean Return 1.47 1.22
R-squared 80.84 80.56
Std. Deviation 15.97 17.95
Alpha 6.96 -2.81
Beta 1.02 1.18
Sharpe Ratio 1.06 0.78
Treynor Ratio 16.69 11.18

The Consumer Discretionary Select Sector SPDR Fund (XLY) has a Mean Return of 1.47 with a Standard Deviation of 15.97 and a Sharpe Ratio of 1.06. Its Alpha is 6.96 while XLY’s Beta is 1.02. Furthermore, the fund has a Treynor Ratio of 16.69 and a R-squared of 80.84.

The Vanguard Small-Cap Growth Index Fund ETF Shares (VBK) has a Beta of 1.18 with a Alpha of -2.81 and a Standard Deviation of 17.95. Its Sharpe Ratio is 0.78 while VBK’s Treynor Ratio is 11.18. Furthermore, the fund has a Mean Return of 1.22 and a R-squared of 80.56.

XLY’s Mean Return is 0.25 points higher than that of VBK and its R-squared is 0.28 points higher. With a Standard Deviation of 15.97, XLY is slightly less volatile than VBK. The Alpha and Beta of XLY are 9.77 points higher and 0.16 points lower than VBK’s Alpha and Beta.

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Performance

Annual Returns

XLY vs. VBK - Annual Returns

Year XLY VBK
2020 29.66% 35.29%
2019 28.43% 32.75%
2018 1.66% -5.68%
2017 22.77% 21.9%
2016 5.87% 10.74%
2015 9.93% -2.51%
2014 9.49% 4.02%
2013 42.74% 38.18%
2012 23.6% 17.67%
2011 5.98% -1.43%
2010 27.36% 30.87%

XLY had its best year in 2013 with an annual return of 42.74%. XLY’s worst year over the past decade yielded 1.66% and occurred in 2018. In most years the Consumer Discretionary Select Sector SPDR Fund provided moderate returns such as in 2015, 2017, and 2012 where annual returns amounted to 9.93%, 22.77%, and 23.6% respectively.

The year 2013 was the strongest year for VBK, returning 38.18% on an annual basis. The poorest year for VBK in the last ten years was 2018, with a yield of -5.68%. Most years the Vanguard Small-Cap Growth Index Fund ETF Shares has given investors modest returns, such as in 2016, 2012, and 2017, when gains were 10.74%, 17.67%, and 21.9% respectively.

Portfolio Growth

XLY vs. VBK - Portfolio Growth

Fund Initial Balance Final Balance CAGR
XLY $10,000 $63,066 18.86%
VBK $10,000 $48,639 16.53%

A $10,000 investment in XLY would have resulted in a final balance of $63,066. This is a profit of $53,066 over 11 years and amounts to a compound annual growth rate (CAGR) of 18.86%.

With a $10,000 investment in VBK, the end total would have been $48,639. This equates to a $38,639 profit over 11 years and a compound annual growth rate (CAGR) of 16.53%.

XLY’s CAGR is 2.34 percentage points higher than that of VBK and as a result, would have yielded $14,427 more on a $10,000 investment. Thus, XLY outperformed VBK by 2.34% annually.


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