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IVW vs. VMBS: What’s The Difference?

The iShares S&P 500 Growth ETF (IVW) and the Vanguard Mortgage-Backed Securities Index Fund ETF Shares (VMBS) are both among the Top 100 ETFs. IVW is a iShares Large Growth fund and VMBS is a Vanguard Intermediate Government fund. So, what’s the difference between IVW and VMBS? And which fund is better?

The expense ratio of IVW is 0.13 percentage points higher than VMBS’s (0.18% vs. 0.05%). IVW also has a high exposure to the technology sector while VMBS is mostly comprised of AAA bonds. Overall, IVW has provided higher returns than VMBS over the past ten years.

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

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Summary

IVWVMBS
NameiShares S&P 500 Growth ETFVanguard Mortgage-Backed Securities Index Fund ETF Shares
CategoryLarge GrowthIntermediate Government
IssueriSharesVanguard
AUM35.72B16.61B
Avg. Return16.74%2.89%
Div. Yield0.61%1.23%
Expense Ratio0.18%0.05%

The iShares S&P 500 Growth ETF (IVW) is a Large Growth fund that is issued by iShares. It currently has 35.72B total assets under management and has yielded an average annual return of 16.74% over the past 10 years. The fund has a dividend yield of 0.61% with an expense ratio of 0.18%.

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%.

IVW’s dividend yield is 0.62% lower than that of VMBS (0.61% vs. 1.23%). Also, IVW yielded on average 13.84% more per year over the past decade (16.74% vs. 2.89%). The expense ratio of IVW is 0.13 percentage points higher than VMBS’s (0.18% vs. 0.05%).

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Fund Composition

Holdings

IVW - Holdings

IVW HoldingsWeight
Apple Inc11.46%
Microsoft Corp10.75%
Amazon.com Inc7.14%
Facebook Inc Class A4.28%
Alphabet Inc Class A4.06%
Alphabet Inc Class C3.86%
Tesla Inc2.65%
NVIDIA Corp2.43%
PayPal Holdings Inc1.62%
Adobe Inc1.49%

IVW’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc Class A, and Alphabet Inc Class A at 11.46%, 10.75%, 7.14%, 4.28%, and 4.06%.

Alphabet Inc Class C (3.86%), Tesla Inc (2.65%), and NVIDIA Corp (2.43%) have a slightly smaller but still significant weight. PayPal Holdings Inc and Adobe Inc are also represented in the IVW’s holdings at 1.62% and 1.49%.

VMBS - Holdings

VMBS Bond SectorsWeight
AAA100.01%
Below B0.0%
B0.0%
BB0.0%
BBB0.0%
A0.0%
AA0.0%
US Government0.0%
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.

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Risk Analysis

IVWVMBS
Mean Return1.440.21
R-squared93.8265.78
Std. Deviation13.772.02
Alpha2.190.37
Beta0.980.54
Sharpe Ratio1.210.94
Treynor Ratio17.243.47

The iShares S&P 500 Growth ETF (IVW) has a R-squared of 93.82 with a Mean Return of 1.44 and a Standard Deviation of 13.77. Its Treynor Ratio is 17.24 while IVW’s Alpha is 2.19. Furthermore, the fund has a Sharpe Ratio of 1.21 and a Beta of 0.98.

The Vanguard Mortgage-Backed Securities Index Fund ETF Shares (VMBS) has a R-squared of 65.78 with a Alpha of 0.37 and a Standard Deviation of 2.02. Its Beta is 0.54 while VMBS’s Sharpe Ratio is 0.94. Furthermore, the fund has a Mean Return of 0.21 and a Treynor Ratio of 3.47.

IVW’s Mean Return is 1.23 points higher than that of VMBS and its R-squared is 28.04 points higher. With a Standard Deviation of 13.77, IVW is slightly more volatile than VMBS. The Alpha and Beta of IVW are 1.82 points higher and 0.44 points higher than VMBS’s Alpha and Beta.

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Performance

Annual Returns

IVW vs. VMBS - Annual Returns

YearIVWVMBS
202033.21%3.77%
201930.91%6.17%
2018-0.17%0.87%
201727.2%2.37%
20166.74%1.43%
20155.33%1.43%
201414.67%5.81%
201332.48%-1.28%
201214.39%2.47%
20114.49%5.89%
201014.84%5.24%

IVW had its best year in 2020 with an annual return of 33.21%. IVW’s worst year over the past decade yielded -0.17% and occurred in 2018. In most years the iShares S&P 500 Growth ETF provided moderate returns such as in 2012, 2014, and 2010 where annual returns amounted to 14.39%, 14.67%, and 14.84% 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

IVW vs. VMBS - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
IVW$10,000$45,20616.74%
VMBS$10,000$13,2652.89%

A $10,000 investment in IVW would have resulted in a final balance of $45,206. This is a profit of $35,206 over 10 years and amounts to a compound annual growth rate (CAGR) of 16.74%.

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%.

IVW’s CAGR is 13.84 percentage points higher than that of VMBS and as a result, would have yielded $31,941 more on a $10,000 investment. Thus, IVW outperformed VMBS by 13.84% annually.


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