The iShares Russell 1000 ETF (IWB) and the Vanguard Mortgage-Backed Securities Index Fund ETF Shares (VMBS) are both among the Top 100 ETFs. IWB is a iShares Large Blend fund and VMBS is a Vanguard Intermediate Government fund. So, what’s the difference between IWB and VMBS? And which fund is better?
The expense ratio of IWB is 0.10 percentage points higher than VMBS’s (0.15% vs. 0.05%). IWB also has a high exposure to the technology sector while VMBS is mostly comprised of AAA bonds. Overall, IWB has provided higher returns than VMBS over the past ten years.
In this article, we’ll compare IWB vs. VMBS. We’ll look at fund composition and performance, as well as at their holdings and industry exposure. Moreover, I’ll also discuss IWB’s and VMBS’s risk metrics, annual returns, and portfolio growth and examine how these affect their overall returns.
FYI: Another great way to get exposure to the real estate sector is by investing in real estate debt. Groundfloor offers fantastic short-term, high-yield bonds that can add diversification to your portfolio!
|Name||iShares Russell 1000 ETF||Vanguard Mortgage-Backed Securities Index Fund ETF Shares|
|Category||Large Blend||Intermediate Government|
The iShares Russell 1000 ETF (IWB) is a Large Blend fund that is issued by iShares. It currently has 30.54B total assets under management and has yielded an average annual return of 14.64% over the past 10 years. The fund has a dividend yield of 1.14% with an expense ratio of 0.15%.
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%.
IWB’s dividend yield is 0.09% lower than that of VMBS (1.14% vs. 1.23%). Also, IWB yielded on average 11.74% more per year over the past decade (14.64% vs. 2.89%). The expense ratio of IWB is 0.10 percentage points higher than VMBS’s (0.15% vs. 0.05%).
FYI: The best way I've found to invest is through M1 Finance. It's free and you even get an instant line of credit and 100$! Have a look here (link to M1 Finance).
|Facebook Inc Class A||2.03%|
|Alphabet Inc Class A||1.93%|
|Alphabet Inc Class C||1.82%|
|Berkshire Hathaway Inc Class B||1.24%|
|JPMorgan Chase & Co||1.09%|
IWB’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc Class A, and Alphabet Inc Class A at 5.45%, 5.11%, 3.43%, 2.03%, and 1.93%.
Alphabet Inc Class C (1.82%), Tesla Inc (1.27%), and Berkshire Hathaway Inc Class B (1.24%) have a slightly smaller but still significant weight. NVIDIA Corp and JPMorgan Chase & Co are also represented in the IWB’s holdings at 1.11% and 1.09%.
|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.
The iShares Russell 1000 ETF (IWB) has a Mean Return of 1.27 with a Sharpe Ratio of 1.05 and a Standard Deviation of 13.87. Its Beta is 1.02 while IWB’s Alpha is -0.38. Furthermore, the fund has a R-squared of 99.73 and a Treynor Ratio of 14.31.
The Vanguard Mortgage-Backed Securities Index Fund ETF Shares (VMBS) has a Beta of 0.54 with a Sharpe Ratio of 0.94 and a Treynor Ratio of 3.47. Its Standard Deviation is 2.02 while VMBS’s Mean Return is 0.21. Furthermore, the fund has a Alpha of 0.37 and a R-squared of 65.78.
IWB’s Mean Return is 1.06 points higher than that of VMBS and its R-squared is 33.95 points higher. With a Standard Deviation of 13.87, IWB is slightly more volatile than VMBS. The Alpha and Beta of IWB are 0.75 points lower and 0.48 points higher than VMBS’s Alpha and Beta.
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).
IWB had its best year in 2013 with an annual return of 32.93%. IWB’s worst year over the past decade yielded -4.91% and occurred in 2018. In most years the iShares Russell 1000 ETF provided moderate returns such as in 2014, 2010, and 2012 where annual returns amounted to 13.08%, 15.94%, and 16.27% 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 IWB would have resulted in a final balance of $36,624. This is a profit of $26,624 over 10 years and amounts to a compound annual growth rate (CAGR) of 14.64%.
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%.
IWB’s CAGR is 11.74 percentage points higher than that of VMBS and as a result, would have yielded $23,359 more on a $10,000 investment. Thus, IWB outperformed VMBS by 11.74% annually.
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)Personal Capital is simply the best tool out there to track your net worth and plan for financial freedom. Just their retirement planner alone has become an invaluable tool to keep myself on track financially. Try it out, it's free!
2) 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!
3) 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!).
4) Groundfloor is another great way to get exposure to the real estate sector by investing in short-term, high-yield real estate debt. Current returns are >10% and you can get started with just $10.
5) If you are interested in startup investing, check out Mainvest. I've started allocating a small amount of assets to invest in and support small businesses. Return targets are between 10-25% and you can start with just $100!
To see all of my most up-to-date recommendations, check out the Recommended Tools section.