GOVT vs. IWS: What’s The Difference?

The iShares U.S. Treasury Bond ETF (GOVT) and the iShares Russell Mid-Cap Value ETF (IWS) are both among the Top 100 ETFs. GOVT is a iShares Intermediate Government fund and IWS is a iShares Mid-Cap Value fund. So, what’s the difference between GOVT and IWS? And which fund is better?

The expense ratio of GOVT is 0.18 percentage points lower than IWS’s (0.05% vs. 0.23%). GOVT is mostly comprised of AAA bonds while IWS has a high exposure to the financial services sector. Overall, GOVT has provided lower returns than IWS over the past 8 years.

In this article, we’ll compare GOVT vs. IWS. We’ll look at risk metrics and annual returns, as well as at their industry exposure and portfolio growth. Moreover, I’ll also discuss GOVT’s and IWS’s performance, fund composition, and holdings and examine how these affect their overall returns.

Summary

GOVT IWS
Name iShares U.S. Treasury Bond ETF iShares Russell Mid-Cap Value ETF
Category Intermediate Government Mid-Cap Value
Issuer iShares iShares
AUM 17.07B 14.24B
Avg. Return 2.67% 12.35%
Div. Yield 1.0% 1.34%
Expense Ratio 0.05% 0.23%

The iShares U.S. Treasury Bond ETF (GOVT) is a Intermediate Government fund that is issued by iShares. It currently has 17.07B total assets under management and has yielded an average annual return of 2.67% over the past 10 years. The fund has a dividend yield of 1.0% with an expense ratio of 0.05%.

The iShares Russell Mid-Cap Value ETF (IWS) is a Mid-Cap Value fund that is issued by iShares. It currently has 14.24B total assets under management and has yielded an average annual return of 12.35% over the past 10 years. The fund has a dividend yield of 1.34% with an expense ratio of 0.23%.

GOVT’s dividend yield is 0.34% lower than that of IWS (1.0% vs. 1.34%). Also, GOVT yielded on average 9.67% less per year over the past decade (2.67% vs. 12.35%). The expense ratio of GOVT is 0.18 percentage points lower than IWS’s (0.05% vs. 0.23%).

FYI: The best way I've found to invest in ETFs is through M1 Finance. It's free and you even get an instant line of credit! Have a look here (link to M1 Finance).

Fund Composition

Holdings

GOVT - Holdings

GOVT Bond Sectors Weight
AAA 100.0%
Others 0.0%
Below B 0.0%
B 0.0%
BB 0.0%
BBB 0.0%
A 0.0%
AA 0.0%
US Government 0.0%

GOVT’s Top Bond Sectors are ratings of AAA, Others, Below B, B, and BB at 100.0%, 0.0%, 0.0%, 0.0%, and 0.0%. The fund is less weighted towards BBB (0.0%), A (0.0%), and AA (0.0%) rated bonds.

IWS - Holdings

IWS Holdings Weight
Twitter Inc 0.69%
Marvell Technology Inc 0.69%
IHS Markit Ltd 0.62%
Prudential Financial Inc 0.56%
Otis Worldwide Corp Ordinary Shares 0.54%
International Flavors & Fragrances Inc 0.53%
Xcel Energy Inc 0.52%
Motorola Solutions Inc 0.52%
Aptiv PLC 0.52%
Aflac Inc 0.52%

IWS’s Top Holdings are Twitter Inc, Marvell Technology Inc, IHS Markit Ltd, Prudential Financial Inc, and Otis Worldwide Corp Ordinary Shares at 0.69%, 0.69%, 0.62%, 0.56%, and 0.54%.

International Flavors & Fragrances Inc (0.53%), Xcel Energy Inc (0.52%), and Motorola Solutions Inc (0.52%) have a slightly smaller but still significant weight. Aptiv PLC and Aflac Inc are also represented in the IWS’s holdings at 0.52% and 0.52%.

NOTE: The easiest way to add diversification to your portfolio is to invest in real estate through Fundrise. You can become private real estate investor without the burden of property management! Check it out here (link to Fundrise).

Risk Analysis

GOVT IWS
Mean Return 0 1.06
R-squared 0 87.04
Std. Deviation 0 16.03
Alpha 0 -4.11
Beta 0 1.1
Sharpe Ratio 0 0.75
Treynor Ratio 0 10.3

The iShares U.S. Treasury Bond ETF (GOVT) has a Beta of 0 with a R-squared of 0 and a Mean Return of 0. Its Sharpe Ratio is 0 while GOVT’s Alpha is 0. Furthermore, the fund has a Treynor Ratio of 0 and a Standard Deviation of 0.

The iShares Russell Mid-Cap Value ETF (IWS) has a Mean Return of 1.06 with a Beta of 1.1 and a R-squared of 87.04. Its Standard Deviation is 16.03 while IWS’s Alpha is -4.11. Furthermore, the fund has a Sharpe Ratio of 0.75 and a Treynor Ratio of 10.3.

GOVT’s Mean Return is 1.06 points lower than that of IWS and its R-squared is 87.04 points lower. With a Standard Deviation of 0, GOVT is slightly less volatile than IWS. The Alpha and Beta of GOVT are 4.11 points higher and 1.10 points lower than IWS’s Alpha and Beta.

BTW: Uncorrelated crypto assets such as Bitcoin can serve as a hedge and mitigate risk. I've allocated around 5% of my portfolio to crypto assets through Coinbase - the simplest and cheapest broker I've found! Click here to read more (link to Coinbase).

Performance

Annual Returns

GOVT vs. IWS - Annual Returns

Year GOVT IWS
2020 7.92% 4.76%
2019 6.71% 26.78%
2018 0.74% -12.36%
2017 2.19% 13.1%
2016 0.92% 19.69%
2015 0.76% -4.93%
2014 4.99% 14.49%
2013 -2.84% 33.11%
2012 0.0% 18.27%
2011 0.0% -1.55%
2010 0.0% 24.46%

GOVT had its best year in 2020 with an annual return of 7.92%. GOVT’s worst year over the past decade yielded -2.84% and occurred in 2013. In most years the iShares U.S. Treasury Bond ETF provided moderate returns such as in 2018, 2015, and 2016 where annual returns amounted to 0.74%, 0.76%, and 0.92% respectively.

The year 2013 was the strongest year for IWS, returning 33.11% on an annual basis. The poorest year for IWS in the last ten years was 2018, with a yield of -12.36%. Most years the iShares Russell Mid-Cap Value ETF has given investors modest returns, such as in 2017, 2014, and 2012, when gains were 13.1%, 14.49%, and 18.27% respectively.

Portfolio Growth

GOVT vs. IWS - Portfolio Growth

Fund Initial Balance Final Balance CAGR
GOVT $10,000 $12,297 2.67%
IWS $10,000 $22,829 12.35%

A $10,000 investment in GOVT would have resulted in a final balance of $12,297. This is a profit of $2,297 over 8 years and amounts to a compound annual growth rate (CAGR) of 2.67%.

With a $10,000 investment in IWS, the end total would have been $22,829. This equates to a $12,829 profit over 8 years and a compound annual growth rate (CAGR) of 12.35%.

GOVT’s CAGR is 9.67 percentage points lower than that of IWS and as a result, would have yielded $10,532 less on a $10,000 investment. Thus, GOVT performed worse than IWS by 9.67% annually.


Current recommendations:

Over the past years, I have discovered several tools and products that have helped me tremendously on my path to financial freedom:

P.S.: The links below are affiliate links, which means I receive a small commission at no extra cost to you when you sign up for one of the services. Thank you for your support!

1) Take a look at M1 Finance, my favorite broker. I love how easy it is to invest and maintain my portfolio with them. I can set up automatic transfers, rebalance my portfolio with one click and even borrow up to 35% of my assets at super low interest rates!

2) Fundrise is by far the best way I've found to invest in Real Estate. You can diversify your portfolio by investing in their eREITs or even allocate capital to individual properties (without the hassle of managing tenants!).

3) If you are interested in crypto, check out Coinbase. I've started allocating a small amount of assets to the growing crypto space and Coinbase has just been a breeze to use. Once you register, make sure to also open an Coinbase Pro account to buy crypto at the lowest fees on the market (just 0.1%!).

To see all of my most up-to-date recommendations, check out the Recommended Tools section.

Leave a Reply