VFH vs XLF: Which ETF Is Better in 2026?
A metric-by-metric comparison of Vanguard Financials Index Fund ETF Shares (VFH) and State Street Financial Select Sector SPDR ETF (XLF) — both Financial funds — using ETFValuer's daily-updated rankings.
Educational content — not financial advice. Data as of July 29, 2026. ~5 minute read.
The Verdict
VFH and XLF are close to the same fund wearing different labels. Both sit in the Financial category and their daily returns move almost identically, so this is not really a question of which fund is better — it is a question of which one is cheaper to own and easier to trade in your account. Everything below is about finding the small, structural edges, because the investment exposure is a wash.
On ETFValuer's overall model — which blends return, risk-adjusted performance, cost, drawdown, size and volatility — XLF scores higher: 65.0 (Grade B) versus 62.0 for VFH. That doesn't make VFH a bad fund; it means XLF currently edges it out on this specific mix of factors. Read the metric-by-metric breakdown below before deciding which matters more for your own portfolio.
Head-to-Head: Every Metric
| VFH | XLF | |
|---|---|---|
| Category | Financial | Financial |
| Expense ratio | 0.09% | 0.08% |
| Fund size (AUM) | $13.8B | $51.4B |
| Dividend yield | 1.77% | 1.02% |
| 1-year return | +10.10% | +9.46% |
| 3-year return | +74.98% | +72.42% |
| Volatility | 14.99% | 14.70% |
| Max drawdown | -17.30% | -15.54% |
| Sharpe ratio | 0.34 | 0.30 |
| ETFValuer score | 62.0 | 65.0 |
| Grade | C | B |
| Overall rank | #209 | #170 |
Bold marks the better value in each row. "Better" is directional only (e.g. lower cost, higher return) — it isn't a recommendation by itself. See the full methodology.
Cost
On cost, the two are essentially tied — VFH charges 0.09% a year versus XLF's 0.08%. A difference this small (about $1.00 a year on a $10,000 position) isn't a reason to choose one fund over the other. That matters more than usual here: when two funds track the same exposure this closely, fee is normally the whole argument — and with the fees this close, there is no argument left. Liquidity and whichever one trades commission-free in your account become the tiebreaker.
What VFH's Fees Cost You
VFH charges an expense ratio of 0.09% a year, deducted automatically from the fund's value. Small percentages compound into real money — adjust the figures below to see the impact on your own numbers.
Assumes a constant gross return and no additional contributions — a simplification, but it isolates exactly what the expense ratio costs. Try the full fee calculator to model contributions and compare any two funds.
Performance & Risk
Over the trailing 3 years, VFH returned +74.98% versus +72.42% for XLF — a gap of about 2.6 percentage points. On risk, XLF has held up better historically, with a shallower max drawdown (-15.54% vs. -17.30%). VFH currently has the better risk-adjusted return (Sharpe ratio of 0.34 vs. 0.30), meaning it delivered more return per unit of volatility taken on.
How Closely Do They Track Each Other?
Over the last 3.0 years of daily returns (750 shared trading days), VFH and XLF show a near-perfect correlation of 0.992 — functionally interchangeable. At this level the two funds are, for practical purposes, the same investment. Owning both adds no diversification whatsoever — the decision should come down entirely to cost, spread and which one your broker handles better.
| Measure | Value | What it means |
|---|---|---|
| Daily return correlation | 0.992 | Near-perfect — functionally interchangeable |
| R-squared | 98.4% | 98.4% of VFH's daily moves are explained by XLF's |
| Tracking error (annualised) | 2.22% | Typical yearly spread between the two funds' returns |
| Annualised return over 3.0y | VFH +20.28% · XLF +19.67% | VFH ahead by 0.61 points a year |
Correlation alone understates how far these can drift. Across every rolling 12-month window in the period, VFH finished as much as +3.6 points ahead of XLF at the best extreme and -1.6 points at the worst — a 5.2-point spread between the best and worst year of relative performance. Two funds can correlate tightly day to day and still deliver very different outcomes over any single year you happen to hold them.
Calculated from daily total returns over the trailing 3-year window, recomputed every day this site refreshes. Correlation of 1.00 means the two funds moved in lockstep; 0.00 means their daily moves were unrelated.
Holdings Overlap
VFH and XLF hold 9 of the same companies among their top 10 positions. Those shared names make up 42.0% of VFH and 54.0% of XLF. That's heavy duplication — owning both largely doubles down on the same companies rather than spreading risk. Most investors should pick one.
| Shared Holding | VFH Weight | XLF Weight |
|---|---|---|
| Berkshire Hathaway Inc | 8.36% | 12.46% |
| JPMorgan Chase & Co | 9.30% | 11.24% |
| Visa Inc | 4.21% | 7.20% |
| Mastercard Inc | 5.29% | 5.77% |
| Bank of America Corp | 4.01% | 4.59% |
| Wells Fargo & Co | 3.13% | 3.49% |
| Goldman Sachs Group Inc/The | 2.97% | 3.60% |
| Morgan Stanley | 2.39% | 2.81% |
| Citigroup Inc | 2.29% | 2.81% |
Compares the top 10 reported holdings from each fund's most recent SEC N-PORT-P filing, so it understates total overlap — funds tracking similar indexes overlap far more deeply than the top 10 alone can show. Search any company across all tracked funds with the Stock Overlap tool.
Which One Should You Pick?
Lean VFH if…
- Current income matters to you — it yields 1.77% against 1.02%
- You weight recent results heavily — it returned 75.0% over 3 years against 72.4%
Lean XLF if…
- You want the lower running cost — 0.08% vs 0.09%, about $1 a year less on a $10,000 position
- You want the deeper, more liquid market ($51B in assets vs $14B)
Whichever you pick, holding both at full weight is usually the wrong answer — see the overlap and correlation sections above.
Frequently Asked Questions
Is VFH or XLF better?
On ETFValuer's overall model — which blends return, risk-adjusted performance, cost, drawdown, size and volatility — XLF scores higher: 65.0 (Grade B) versus 62.0 for VFH. That doesn't make VFH a bad fund; it means XLF currently edges it out on this specific mix of factors. Read the metric-by-metric breakdown below before deciding which matters more for your own portfolio.
Which has the lower expense ratio, VFH or XLF?
XLF currently has the lower expense ratio (0.08% vs. 0.09%).
Can I hold both VFH and XLF?
You can, but there's little point. VFH and XLF have a daily return correlation of 0.99 over the past 3.0 years, meaning they move almost in lockstep. Holding both roughly doubles a single bet rather than spreading it — pick whichever wins on cost and liquidity and put the money in one place.
Go deeper on either fund
Full daily-updated metrics, holdings context, and category peers.