The SPDR Dow Jones Industrial Average ETF Trust (DIA) and the Vanguard Mortgage-Backed Securities Index Fund ETF Shares (VMBS) are both among the Top 100 ETFs. DIA is a SPDR State Street Global Advisors Large Value fund and VMBS is a Vanguard Intermediate Government fund. So, what’s the difference between DIA and VMBS? And which fund is better?
The expense ratio of DIA is 0.11 percentage points higher than VMBS’s (0.16% vs. 0.05%). DIA also has a high exposure to the financial services sector while VMBS is mostly comprised of AAA bonds. Overall, DIA has provided higher returns than VMBS over the past ten years.
In this article, we’ll compare DIA vs. VMBS. We’ll look at industry exposure and holdings, as well as at their portfolio growth and performance. Moreover, I’ll also discuss DIA’s and VMBS’s annual returns, fund composition, and risk metrics and examine how these affect their overall returns.
Summary
| DIA | VMBS | |
| Name | SPDR Dow Jones Industrial Average ETF Trust | Vanguard Mortgage-Backed Securities Index Fund ETF Shares |
| Category | Large Value | Intermediate Government |
| Issuer | SPDR State Street Global Advisors | Vanguard |
| AUM | 30.46B | 16.61B |
| Avg. Return | 13.35% | 2.89% |
| Div. Yield | 1.61% | 1.23% |
| Expense Ratio | 0.16% | 0.05% |
The SPDR Dow Jones Industrial Average ETF Trust (DIA) is a Large Value fund that is issued by SPDR State Street Global Advisors. It currently has 30.46B total assets under management and has yielded an average annual return of 13.35% over the past 10 years. The fund has a dividend yield of 1.61% with an expense ratio of 0.16%.
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%.
DIA’s dividend yield is 0.38% higher than that of VMBS (1.61% vs. 1.23%). Also, DIA yielded on average 10.46% more per year over the past decade (13.35% vs. 2.89%). The expense ratio of DIA is 0.11 percentage points higher than VMBS’s (0.16% vs. 0.05%).
Fund Composition
Holdings
| DIA Holdings | Weight |
| UnitedHealth Group Inc | 7.63% |
| Goldman Sachs Group Inc | 7.23% |
| The Home Depot Inc | 6.07% |
| Microsoft Corp | 5.16% |
| Salesforce.com Inc | 4.65% |
| Amgen Inc | 4.64% |
| Boeing Co | 4.56% |
| Visa Inc Class A | 4.45% |
| McDonald’s Corp | 4.4% |
| Honeywell International Inc | 4.18% |
DIA’s Top Holdings are UnitedHealth Group Inc, Goldman Sachs Group Inc, The Home Depot Inc, Microsoft Corp, and Salesforce.com Inc at 7.63%, 7.23%, 6.07%, 5.16%, and 4.65%.
Amgen Inc (4.64%), Boeing Co (4.56%), and Visa Inc Class A (4.45%) have a slightly smaller but still significant weight. McDonald’s Corp and Honeywell International Inc are also represented in the DIA’s holdings at 4.4% and 4.18%.
| VMBS Bond Sectors | Weight |
| AAA | 100.01% |
| Below B | 0.0% |
| B | 0.0% |
| BB | 0.0% |
| BBB | 0.0% |
| A | 0.0% |
| AA | 0.0% |
| US Government | 0.0% |
| Others | -0.01% |
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.
Risk Analysis
| DIA | VMBS | |
| Mean Return | 1.13 | 0.21 |
| R-squared | 93.31 | 65.78 |
| Std. Deviation | 13.68 | 2.02 |
| Alpha | -0.94 | 0.37 |
| Beta | 0.97 | 0.54 |
| Sharpe Ratio | 0.94 | 0.94 |
| Treynor Ratio | 13.07 | 3.47 |
The SPDR Dow Jones Industrial Average ETF Trust (DIA) has a Treynor Ratio of 13.07 with a Alpha of -0.94 and a Sharpe Ratio of 0.94. Its R-squared is 93.31 while DIA’s Mean Return is 1.13. Furthermore, the fund has a Standard Deviation of 13.68 and a Beta of 0.97.
The Vanguard Mortgage-Backed Securities Index Fund ETF Shares (VMBS) has a Mean Return of 0.21 with a Treynor Ratio of 3.47 and a Sharpe Ratio of 0.94. Its Alpha is 0.37 while VMBS’s R-squared is 65.78. Furthermore, the fund has a Standard Deviation of 2.02 and a Beta of 0.54.
DIA’s Mean Return is 0.92 points higher than that of VMBS and its R-squared is 27.53 points higher. With a Standard Deviation of 13.68, DIA is slightly more volatile than VMBS. The Alpha and Beta of DIA are 1.31 points lower and 0.43 points higher than VMBS’s Alpha and Beta.
Performance
Annual Returns
| Year | DIA | VMBS |
| 2020 | 9.63% | 3.77% |
| 2019 | 25.09% | 6.17% |
| 2018 | -3.6% | 0.87% |
| 2017 | 27.97% | 2.37% |
| 2016 | 16.28% | 1.43% |
| 2015 | 0.1% | 1.43% |
| 2014 | 9.88% | 5.81% |
| 2013 | 29.41% | -1.28% |
| 2012 | 10.04% | 2.47% |
| 2011 | 8.21% | 5.89% |
| 2010 | 13.87% | 5.24% |
DIA had its best year in 2013 with an annual return of 29.41%. DIA’s worst year over the past decade yielded -3.6% and occurred in 2018. In most years the SPDR Dow Jones Industrial Average ETF Trust provided moderate returns such as in 2014, 2012, and 2010 where annual returns amounted to 9.88%, 10.04%, and 13.87% 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.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| DIA | $10,000 | $33,341 | 13.35% |
| VMBS | $10,000 | $13,265 | 2.89% |
A $10,000 investment in DIA would have resulted in a final balance of $33,341. This is a profit of $23,341 over 10 years and amounts to a compound annual growth rate (CAGR) of 13.35%.
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%.
DIA’s CAGR is 10.46 percentage points higher than that of VMBS and as a result, would have yielded $20,076 more on a $10,000 investment. Thus, DIA outperformed VMBS by 10.46% annually.
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