XLV Vs VHT: Spotting The Key Differences
LAST UPDATED: May 20, 2023 | By Conrad Golly
Are you an individual investor looking to invest in healthcare ETFs? If so, you might have come across two popular options: XLV and VHT. While both funds focus on the healthcare sector, there are some key differences between them that you should be aware of before making a decision. XLV Vs VHT:
XLV is an ETF managed by State Street Global Advisors, while VHT is managed by Vanguard. One of the main differences between the two funds is their expense ratio: XLV charges 0.12% while VHT charges 0.1%. While this may not seem like a significant difference, over time it can add up and impact your returns. Additionally, XLV has a higher exposure to the healthcare sector and a lower standard deviation compared to VHT.
So, which healthcare ETF is better for you? It ultimately depends on your investment goals and risk tolerance. In this article, we’ll take a closer look at the differences between XLV and VHT, so you can make an informed decision about which fund is right for you.
Summary XLV vs VHT
When it comes to investing in the healthcare sector, two popular ETFs are XLV and VHT. Both provide exposure to the healthcare industry, but there are some key differences between the two.
One of the main differences between XLV and VHT is their holdings. XLV tracks the S&P 500’s healthcare sector, which includes 66 holdings, while VHT tracks the Spliced U.S. Investable Market Health Care 25/50 Index, which includes 410 holdings. This means that VHT is much less concentrated than XLV, which could potentially lead to less risk during market downturns.
Another important factor to consider is the expense ratio. XLV has an expense ratio of 0.12%, which is slightly higher than VHT’s expense ratio of 0.10%. However, both are relatively low compared to other ETFs in the healthcare sector.
In terms of assets, XLV has a larger asset base than VHT, with over $28 billion in assets under management compared to VHT’s $14 billion. This could be due in part to XLV’s longer history, as it was launched in 1998 compared to VHT’s launch in 2004.
When it comes to fees, both XLV and VHT have similar fees for buying and selling shares. However, it’s important to note that fees can add up over time, so it’s important to consider the overall expense ratio as well.
Fund Composition XLV vs VHT
When it comes to investing in healthcare, it’s important to understand the differences between the two most popular ETFs, XLV and VHT. In this section, we’ll compare the fund composition of XLV and VHT, focusing on their industry exposure and holdings.
Industry Exposure XLV vs VHT
Both XLV and VHT track the healthcare sector, but their industry exposure differs slightly. XLV, which tracks the Health Care Select Sector Index, includes companies from the following industries:
- Pharmaceuticals
- Healthcare equipment and supplies
- Biotechnology
- Life sciences tools and services
- Healthcare providers and services
On the other hand, VHT, which tracks the Vanguard Health Care Index Fund ETF Shares, includes companies from the following industries:
- Pharmaceuticals
- Biotechnology
- Healthcare equipment and supplies
- Healthcare providers and services
As we can see, VHT has a slightly narrower focus than XLV, with no exposure to the life sciences tools and services industry. However, both funds provide investors with exposure to a wide range of healthcare companies.
Holdings XLV vs VHT
When it comes to holdings, XLV and VHT have some overlap, but also some notable differences. As of May 20, 2023, XLV had total assets of $31.9 billion and an average daily volume of 6.4 million shares. VHT, on the other hand, had total assets of $27.6 billion and an average daily volume of 1.8 million shares.
XLV’s top holdings include:
- Johnson & Johnson
- Pfizer Inc.
- UnitedHealth Group Inc.
- Merck & Co. Inc.
- Abbott Laboratories
Meanwhile, VHT’s top holdings include:
- Johnson & Johnson
- UnitedHealth Group Inc.
- Pfizer Inc.
- Merck & Co. Inc.
- Abbott Laboratories
As we can see, the top holdings of XLV and VHT are largely the same, with a few differences in the order. However, it’s worth noting that XLV has a higher expense ratio than VHT (0.12% vs 0.1%) and a higher exposure to the healthcare sector.
Risk Analysis XLV vs VHT
When investing in the health care sector, it’s important to consider the risks associated with each fund. Both XLV and VHT are non-diversified funds that invest in the health care sector. However, there are some differences in their risk profiles.
One way to measure risk is through the Sharpe Ratio, which measures the excess return per unit of risk. Both XLV and VHT have a Sharpe Ratio of 1.13, indicating that they have similar risk-adjusted returns. However, it’s important to note that the Sharpe Ratio only takes into account the volatility of returns and does not consider other factors such as market conditions or company-specific risks.
Another way to measure risk is through alpha, which measures the excess return of a fund compared to its benchmark. XLV has an alpha of 7.75, indicating that it has outperformed its benchmark. VHT, on the other hand, has an alpha of -0.18, indicating that it has underperformed its benchmark. This suggests that XLV may have a higher risk tolerance and may be better suited for investors who are willing to take on more risk for potentially higher returns.
It’s also worth noting that XLV has a higher exposure to small-caps compared to VHT. Small-caps are generally considered to be riskier than large-caps due to their higher volatility and lower liquidity. This means that XLV may be more volatile than VHT and may experience larger fluctuations in price.
Performance XLV vs VHT
When it comes to investing in healthcare, you may be wondering which ETF to choose between XLV and VHT. One crucial factor to consider is their performance. Let’s take a closer look at how XLV and VHT have performed historically.
Annual Returns
When comparing the annual returns of XLV and VHT, we can see that both have had impressive returns over the past few years. In 2021, XLV had an annual return of 20.89%, while VHT had an annual return of 19.84%. However, it’s essential to note that past performance is not an indicator of future results.
Portfolio Growth
XLV and VHT have different portfolios, which can significantly impact their growth. XLV tracks the S&P 500’s healthcare sector, while VHT tracks the Spliced U.S. Investable Market Health Care 25/50 Index. As of May 20, 2023, XLV has assets under management of $28.7 billion, while VHT has assets under management of $38.1 billion.
During market downturns, XLV has shown to be more resilient than VHT. For example, during the COVID-19 pandemic in 2020, XLV had a maximum drawdown of 19.95%, while VHT had a maximum drawdown of 23.37%. This difference in performance during a market downturn can be attributed to XLV’s portfolio being more diversified than VHT’s.
Verdict XLV vs VHT
When it comes to choosing between XLV and VHT, it ultimately depends on your investment goals and risk tolerance. Both funds are excellent options for investing in the health care sector, but they have some key differences that may make one more appealing than the other.
If you are looking for a fund with lower expenses and higher exposure to the health care sector, then XLV might be the better choice. With an expense ratio of 0.12%, XLV is slightly cheaper than VHT, which has an expense ratio of 0.10%. Additionally, XLV has a higher exposure to the health care sector, with over 60% of its holdings in the sector.
On the other hand, if you are looking for a more diversified option with exposure to a wider range of health care companies, then VHT might be the way to go. VHT tracks the Spliced U.S. Investable Market Health Care 25/50 Index, which includes a broader range of companies than the S&P 500 Health Care Index that XLV tracks. As a result, VHT has a lower concentration of holdings in the top ten companies, making it less risky.
The bottom line is that both XLV and VHT are excellent options for investing in the health care sector. If you are looking for a lower expense ratio and higher exposure to the sector, then XLV might be the better choice. If you want a more diversified option with exposure to a wider range of companies, then VHT is the way to go.
Before you go…
