The iShares MSCI ACWI ETF (ACWI) and the Vanguard Mortgage-Backed Securities Index Fund ETF Shares (VMBS) are both among the Top 100 ETFs. ACWI is a iShares N/A fund and VMBS is a Vanguard Intermediate Government fund. So, what’s the difference between ACWI and VMBS? And which fund is better?
The expense ratio of ACWI is 0.27 percentage points higher than VMBS’s (0.32% vs. 0.05%). ACWI also has a high exposure to the technology sector while VMBS is mostly comprised of AAA bonds. Overall, ACWI has provided higher returns than VMBS over the past 10 years.
In this article, we’ll compare ACWI vs. VMBS. We’ll look at industry exposure and risk metrics, as well as at their portfolio growth and annual returns. Moreover, I’ll also discuss ACWI’s and VMBS’s performance, fund composition, and holdings and examine how these affect their overall returns.
|Name||iShares MSCI ACWI ETF||Vanguard Mortgage-Backed Securities Index Fund ETF Shares|
The iShares MSCI ACWI ETF (ACWI) is a N/A fund that is issued by iShares. It currently has 16.85B total assets under management and has yielded an average annual return of 10.21% over the past 10 years. The fund has a dividend yield of 1.39% with an expense ratio of 0.32%.
The Vanguard Mortgage-Backed Securities Index Fund ETF Shares (VMBS) is a Intermediate Government fund that is issued by Vanguard. It currently has 16.61B total assets under management and has yielded an average annual return of 2.89% over the past 10 years. The fund has a dividend yield of 1.23% with an expense ratio of 0.05%.
ACWI’s dividend yield is 0.16% higher than that of VMBS (1.39% vs. 1.23%). Also, ACWI yielded on average 7.32% more per year over the past decade (10.21% vs. 2.89%). The expense ratio of ACWI is 0.27 percentage points higher than VMBS’s (0.32% vs. 0.05%).
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|Facebook Inc A||1.25%|
|Alphabet Inc Class C||1.12%|
|Alphabet Inc A||1.09%|
|Taiwan Semiconductor Manufacturing Co Ltd||0.79%|
|JPMorgan Chase & Co||0.71%|
ACWI’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc A, and Alphabet Inc Class C at 3.44%, 2.91%, 2.21%, 1.25%, and 1.12%.
Alphabet Inc A (1.09%), Taiwan Semiconductor Manufacturing Co Ltd (0.79%), and Tesla Inc (0.78%) have a slightly smaller but still significant weight. NVIDIA Corp and JPMorgan Chase & Co are also represented in the ACWI’s holdings at 0.74% and 0.71%.
|VMBS Bond Sectors||Weight|
VMBS’s Top Bond Sectors are ratings of AAA, Below B, B, BB, and BBB at 100.01%, 0.0%, 0.0%, 0.0%, and 0.0%. The fund is less weighted towards A (0.0%), AA (0.0%), and US Government (0.0%) rated bonds.
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The iShares MSCI ACWI ETF (ACWI) has a R-squared of 99.96 with a Sharpe Ratio of 0.71 and a Beta of 1. Its Treynor Ratio is 9.45 while ACWI’s Alpha is 0.15. Furthermore, the fund has a Standard Deviation of 14.05 and a Mean Return of 0.89.
The Vanguard Mortgage-Backed Securities Index Fund ETF Shares (VMBS) has a Mean Return of 0.21 with a Alpha of 0.37 and a R-squared of 65.78. Its Standard Deviation is 2.02 while VMBS’s Beta is 0.54. Furthermore, the fund has a Treynor Ratio of 3.47 and a Sharpe Ratio of 0.94.
ACWI’s Mean Return is 0.68 points higher than that of VMBS and its R-squared is 34.18 points higher. With a Standard Deviation of 14.05, ACWI is slightly more volatile than VMBS. The Alpha and Beta of ACWI are 0.22 points lower and 0.46 points higher than VMBS’s Alpha and Beta.
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ACWI had its best year in 2019 with an annual return of 26.7%. ACWI’s worst year over the past decade yielded -9.15% and occurred in 2018. In most years the iShares MSCI ACWI ETF provided moderate returns such as in 2016, 2010, and 2012 where annual returns amounted to 8.22%, 12.31%, and 15.99% respectively.
The year 2019 was the strongest year for VMBS, returning 6.17% on an annual basis. The poorest year for VMBS in the last ten years was 2013, with a yield of -1.28%. Most years the Vanguard Mortgage-Backed Securities Index Fund ETF Shares has given investors modest returns, such as in 2017, 2012, and 2020, when gains were 2.37%, 2.47%, and 3.77% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in ACWI would have resulted in a final balance of $24,255. This is a profit of $14,255 over 10 years and amounts to a compound annual growth rate (CAGR) of 10.21%.
With a $10,000 investment in VMBS, the end total would have been $13,265. This equates to a $3,265 profit over 10 years and a compound annual growth rate (CAGR) of 2.89%.
ACWI’s CAGR is 7.32 percentage points higher than that of VMBS and as a result, would have yielded $10,990 more on a $10,000 investment. Thus, ACWI outperformed VMBS by 7.32% annually.
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