VIS vs XLI

Key Takeaways

• Same sector, different depth: Both funds target the U.S. industrials sector, but VIS holds roughly 390–400 companies across large-, mid-, and small-caps, while XLI holds only about 81–84 large-cap names drawn from the S&P 500 (Standard & Poor's 500 index).
• Concentration differs: XLI carries a more concentrated, mega-cap-heavy profile, whereas VIS spreads risk across a broader, deeper multi-cap universe.
• Costs are nearly identical: VIS charges a 0.09% expense ratio, and XLI charges 0.08%, making both among the cheapest ways to own industrials.
• Overlapping anchors: The two funds share nearly the same top holdings, including Caterpillar (CAT), GE Aerospace (GE), and RTX (RTX).
• Positioning question: The choice largely comes down to whether investors prefer broad diversification (VIS) or concentrated large-cap exposure to sector leaders (XLI).

Introduction

Industrial-sector ETFs have drawn renewed attention as investors weigh reshoring trends, defense spending, infrastructure investment, and the electrification of the economy. The Vanguard Industrials Index Fund ETF Shares (VIS) and the Industrial Select Sector SPDR Fund (XLI) both offer passive access to U.S. industrials, yet they are not identical vehicles. VIS captures the entire investable industrial market, while XLI targets only the large-cap industrial names within the S&P 500. Understanding their structural differences is essential for investors seeking precise sector exposure and relative positioning.

Vanguard Industrials Index Fund ETF Shares (VIS) Overview

VIS is a passively managed ETF that seeks to track the MSCI US Investable Market Industrials 25/50 Index. That benchmark spans large-, mid-, and small-cap U.S. companies classified under the industrials sector of the GICS (Global Industry Classification Standard). With roughly 390–400 holdings, VIS is one of the broadest industrials funds available and meaningfully diversifies company-specific risk.

Its largest positions include Caterpillar (CAT), GE Aerospace (GE), RTX (RTX), GE Vernova (GEV), and Deere & Co. (DE), with additional weight in Eaton (ETN), Boeing (BA), Union Pacific (UNP), Uber Technologies (UBER), and Parker-Hannifin (PH). The top ten names collectively represent roughly 30% of assets. Industrials account for about 91–92% of the portfolio, with a smaller technology sleeve reflecting GICS reclassifications. The fund charges a 0.09% expense ratio and employs a full-replication approach where feasible.

Industrial Select Sector SPDR Fund (XLI) Overview

XLI is a passively managed ETF that seeks to correspond generally to the Industrial Select Sector Index, which contains the industrial companies of the S&P 500. As a result, XLI is exclusively large-cap and holds approximately 81–84 names. This gives it a more concentrated, mega-cap-tilted profile and greater sensitivity to a handful of dominant industry leaders.

Its top holdings closely mirror VIS, led by Caterpillar (CAT), GE Aerospace (GE), RTX (RTX), and GE Vernova (GEV), followed by Union Pacific (UNP), Deere & Co. (DE), Eaton (ETN), Boeing (BA), and Uber Technologies (UBER). The top ten holdings represent roughly 39% of assets, a higher concentration than VIS. The fund carries a 0.08% expense ratio and is structured as a non-diversified fund under its prospectus.

Industry and Thematic Backdrop

Both ETFs operate within the same macro currents shaping U.S. industrials. Reshoring and supply-chain reconfiguration have supported domestic manufacturing and capital-goods demand. Defense and aerospace budgets remain elevated amid geopolitical tension, benefiting large primes and their suppliers. Electrification, data-center buildout, and grid modernization have reinforced demand for electrical equipment and power-related machinery, a tailwind visible in holdings such as GE Vernova and Eaton. At the same time, the sector remains cyclical: transportation, machinery, and construction names are sensitive to interest-rate expectations, freight volumes, and broader economic growth. Tariffs and trade policy add a layer of input-cost and margin risk that can affect relative positioning across subsectors.

Performance and Positioning Comparison

Over recent weeks and months, the two funds have tended to move in close correlation because of their shared top holdings. However, their return profiles diverge at the margins. XLI's large-cap concentration means its fund performance is more heavily influenced by the earnings cycles of mega-cap names in aerospace, defense, and electrical equipment. VIS's inclusion of mid- and small-cap industrials introduces exposure to smaller, more domestically oriented companies that can respond differently to economic acceleration or credit conditions.

During recent market cycles, large-cap industrial leaders have often driven sector leadership, favoring XLI's concentrated tilt. Conversely, VIS's broader base can offer slightly lower single-name concentration risk and different volatility characteristics. Both funds carry similar beta profiles relative to the broad market, but XLI's narrower roster can make it marginally more sensitive to swings in its largest constituents.

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Tickeron AI Verdict

Based on observable structural factors, Tickeron's AI would currently express a modest preference for XLI. Its concentrated exposure to large-cap sector leaders aligns with the trend consistency and sector momentum that have characterized recent industrial leadership in aerospace, defense, and electrical equipment. XLI also offers a slightly lower expense ratio and deep liquidity, reflecting its substantially larger asset base. That said, VIS retains a structural edge in diversification and cost efficiency for investors who prefer broader, multi-cap coverage with reduced single-name concentration. The final choice depends on whether an investor prioritizes concentrated momentum or diversified resilience.

Disclaimer

The information on this webpage is provided for general informational and educational purposes only and is not intended as investment advice, a recommendation to purchase or sell any security, or an offer or solicitation related to investments. It does not consider your personal financial situation, goals, or risk profile, and all investing carries inherent risks, including the possibility of losing your entire investment. For more details, please review our full disclaimer.

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