Comparison of State Street Financial Select Sector SPDR ETF and Vanguard Financials ETF
The State Street Financial Select Sector SPDR ETF and the Vanguard Financials ETF both cater to investors interested in the U.S. financial sector. The former offers substantial exposure to large-cap companies in the S&P 500, while the latter includes a wider range of stocks, including small-cap options.
When investors are looking to dip their toes into the financial waters, these two funds often come up for consideration. Both track banks, insurance firms, and capital markets companies, yet their methodologies create different risk profiles. State Street’s fund zeroes in on industry giants, whereas Vanguard spreads its net wider for more diverse exposure.
Snapshots (Cost and Size)
| Metric | VFH | SPDR |
|---|---|---|
| Publisher | Vanguard | State Street |
| Expense Ratio | 0.09% | 0.08% |
| 1 Year Return (as of May 20, 2026) | 6.73% | 4.99% |
| Dividend Yield | 1.50% | 1.50% |
| Beta | 0.92 | 0.87 |
| Assets Under Management | $13.7 billion | $51.46 billion |
Beta reflects volatility in relation to the S&P 500, calculated using five years of monthly returns. One year’s return measures total returns for the next twelve months. Dividend yield is based on trailing twelve-month distributions.
The cost difference between the two funds is minimal, with the State Street Fund having a slightly lower expense ratio at 0.08% compared to Vanguard’s 0.09%. For an investment of $10,000, this results in just a $1 yearly difference. Both ETFs also offer a similar dividend yield of 1.50%.
Performance and Risk Comparison
| Metric | VFH | XLF |
|---|---|---|
| Maximum Drawdown (5 Years) | (25.70%) | (25.80%) |
| $1,000 Growth in 5 Years (Total Return) | $1,514 | $1,498 |
What’s Inside
The State Street Financial Select Sector SPDR ETF encompasses 76 stocks within the S&P 500 Financials sector, focusing on banks, real estate investment trusts, consumer finance, and large insurance companies. Key holdings include Berkshire Hathaway at 11.99%, JPMorgan Chase & Co. at 11.07%, and Visa at 7.56%.
This portfolio is primarily composed of 98% financial services, with 2% in technology. Founded in 1998, State Street Fund has a $0.79 per share year-end dividend and has traded between $47.67 and $56.52 over the past year.
On the other hand, the Vanguard Financials ETF adopts a broader approach with 404 holdings, reaching beyond the largest companies. JPMorgan Chase is the largest position at 9.52%, followed by Berkshire Hathaway at 7.73%, and MasterCard at 5.05%.
Its sector allocation consists of 97% financial services, 2% technology, and 1% real estate. Launched in 2004, the Vanguard Fund has a trailing 12-month dividend of $1.94 per share, with trading occurring within a 52-week range of $116.67 and $137.89. The fund aims for precise tracking of its benchmark through full replication when possible.
What This Means for Investors
Investors aiming for an ETF focused on the financial sector can choose between the State Street Financial Select Sector SPDR ETF (XLF) and the Vanguard Financials ETF (VFH). Their differing strategies cater to different investor goals. Given their similar expense ratios and identical dividend yields, the decision generally rests on individual investment objectives.
XLF emphasizes financial stocks from the S&P 500, linking its performance closely to these major companies, with Berkshire Hathaway and JPMorgan Chase making up over 20% of the fund. This targeted approach has contributed to XLF’s significantly higher assets under management compared to VFH, offering better liquidity for active traders, though the trade-off is lower one-year returns.
On the flip side, VFH provides more diversification with its selection of over 400 holdings, including mid and small-cap financial firms. This wider approach mitigates dependence on a few companies and has led to stronger one-year returns. However, smaller firms can bring higher risk. The Vanguard fund is classified as Risk Level 5, indicating substantial potential for volatility.
So, while VFH is better suited for those looking for broader financial sector exposure and are willing to accept more risk, XLF might appeal to more conservative investors focused on large, established players.
