The Vanguard Health Care Index Fund ETF (VHT) and State Street’s The Health Care Select Sector SPDR Fund (XLV) are two of the largest health care sector ETFs and two of the most popular among individual investors. Many investors compare VHT vs XLV because they are so similar. The funds are nearly identical, especially if we focus on the past 15 years.

A quick reminder that this site does NOT provide investment recommendations. Fund comparisons (such as this one) are not conducted to identify the “best” fund (since that will vary from investor to investor based on investor-specific factors). Rather, these fund comparison posts are designed to identify and distinguish between the fund details that matter versus the ones that don’t.

The Short Answer

The primary difference between the funds is that XLV is a large-cap fund, while VHT includes mid-caps and small-caps.

The Longer Answer

Historical Performance: VHT vs XLV

XLV was launched back in 1998, while VHT was launched in 2004. Since the VHT’s launch, the two funds have performed similarly, with an annualized difference of only .40%. The cumulative performance differential over that timeframe has compounded to roughly 42% though.

Interestingly, if we look at performance over the past 10 years (from 2013 through 2022), we find that the annualized performance difference is only .12%! There appears to be some deviation during the pandemic, but that gap has closed and the overall performance is nearly identical.

Portfolio Exposures: VHT vs XLV

XLV tracks the Health Care Select Sector Index, which is essentially a sub-index of the S&P 500 (which is predominantly composed of large-caps). It has changed over the years, but the index that VHT currently tracks is includes more mid-caps and small-caps (even though it is also predominantly large-caps).

Geographic Exposure

Both VHT and XLV hold essentially 100% stocks, so I will not dig into country exposures or market classification here. For all intents and purposes, the two funds have identical geographic exposures.

Market Cap Exposure

As the below data illustrates, XLV primarily holds large-caps, while VHT is a bit more diversified in terms of market cap. Despite this difference, both funds are market-cap weighted and risk/return is overwhelmingly driven by the large-cap exposure.

Large Cap90%77%
Mid Cap11%14%
Small Cap0%8%
Source: ThoughtfulFinance.com, Morningstar (data as of 1/31/2023 for VHT & 2/10/2023 for XLV)

Sector Exposure

VHT and XLV are health care ETFs and so their holdings are 100% health care stocks.

Practical Factors: VHT vs XLV

Transaction Costs

As ETFs, both XLV and VHT are free to trade on many platforms. Bid-ask spreads for both VHT and XLV are extremely low and volume is sufficient to prevent most individual investors from “moving the market.” Investors looking for a mutual fund version of VHT should consider VHCIX and read my comparison of VHT and VHCIX.


The expense ratio for both XLV and VHT is .10%. At these low levels of expense ratios, small differences in expense ratios does not typically matter anyways. Something to keep in mind if one fund or the other decides to reduce fees.

Tax Efficiency & Capital Gain Distributions

VHT has never made a capital gain distribution and XLV has not made one since 2000. I do not expect either fund to make capital gains distributions moving forward (since they are ETFs). In my opinion, these two funds are equally tax-efficient.

Options Strategies

The one factor that may sway someone towards XLV is if they are managing some type of option strategy, such as covered calls. The options market for XLV is much more active than for VHT. Of course, if someone wants to trade options without triggering tax consequences in another part of their portfolio, perhaps VHT is the better pick for the non-option holding.

Bottom Line: VHT vs XLV

VHT and XLV are nearly identical in most ways and the decision to use versus the other depends on an investor’s preference for small-caps vs large-caps. I believe investors’ time is better spent evaluating and thinking through more material decisions.

Investors looking for other health care ETFs may want to read my comparison of VHT and FHLC (Fidelity’s health care ETF).

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