The iShares Russell 1000 Value ETF (IWD) and the Vanguard Mortgage-Backed Securities Index Fund ETF Shares (VMBS) are both among the Top 100 ETFs. IWD is a iShares Large Value fund and VMBS is a Vanguard Intermediate Government fund. So, what’s the difference between IWD and VMBS? And which fund is better?
The expense ratio of IWD is 0.14 percentage points higher than VMBS’s (0.19% vs. 0.05%). IWD also has a high exposure to the financial services sector while VMBS is mostly comprised of AAA bonds. Overall, IWD has provided higher returns than VMBS over the past ten years.
In this article, we’ll compare IWD vs. VMBS. We’ll look at annual returns and risk metrics, as well as at their fund composition and portfolio growth. Moreover, I’ll also discuss IWD’s and VMBS’s holdings, industry exposure, and performance and examine how these affect their overall returns.
|Name||iShares Russell 1000 Value ETF||Vanguard Mortgage-Backed Securities Index Fund ETF Shares|
|Category||Large Value||Intermediate Government|
The iShares Russell 1000 Value ETF (IWD) is a Large Value fund that is issued by iShares. It currently has 54.1B total assets under management and has yielded an average annual return of 11.40% over the past 10 years. The fund has a dividend yield of 1.57% with an expense ratio of 0.19%.
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%.
IWD’s dividend yield is 0.34% higher than that of VMBS (1.57% vs. 1.23%). Also, IWD yielded on average 8.51% more per year over the past decade (11.40% vs. 2.89%). The expense ratio of IWD is 0.14 percentage points higher than VMBS’s (0.19% vs. 0.05%).
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|Berkshire Hathaway Inc Class B||2.58%|
|JPMorgan Chase & Co||2.25%|
|Johnson & Johnson||2.24%|
|UnitedHealth Group Inc||1.78%|
|Procter & Gamble Co||1.71%|
|The Walt Disney Co||1.5%|
|Bank of America Corp||1.43%|
|Comcast Corp Class A||1.33%|
|Exxon Mobil Corp||1.2%|
IWD’s Top Holdings are Berkshire Hathaway Inc Class B, JPMorgan Chase & Co, Johnson & Johnson, UnitedHealth Group Inc, and Procter & Gamble Co at 2.58%, 2.25%, 2.24%, 1.78%, and 1.71%.
The Walt Disney Co (1.5%), Bank of America Corp (1.43%), and Comcast Corp Class A (1.33%) have a slightly smaller but still significant weight. Exxon Mobil Corp and Pfizer Inc are also represented in the IWD’s holdings at 1.2% and 1.18%.
|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 Russell 1000 Value ETF (IWD) has a Standard Deviation of 14.35 with a Alpha of -3.23 and a Mean Return of 1.03. Its Sharpe Ratio is 0.81 while IWD’s Treynor Ratio is 11.06. Furthermore, the fund has a Beta of 1.02 and a R-squared of 92.38.
The Vanguard Mortgage-Backed Securities Index Fund ETF Shares (VMBS) has a Alpha of 0.37 with a Beta of 0.54 and a Treynor Ratio of 3.47. Its R-squared is 65.78 while VMBS’s Mean Return is 0.21. Furthermore, the fund has a Sharpe Ratio of 0.94 and a Standard Deviation of 2.02.
IWD’s Mean Return is 0.82 points higher than that of VMBS and its R-squared is 26.60 points higher. With a Standard Deviation of 14.35, IWD is slightly more volatile than VMBS. The Alpha and Beta of IWD are 3.60 points lower and 0.48 points higher than VMBS’s Alpha and Beta.
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IWD had its best year in 2013 with an annual return of 32.18%. IWD’s worst year over the past decade yielded -8.4% and occurred in 2018. In most years the iShares Russell 1000 Value ETF provided moderate returns such as in 2014, 2017, and 2010 where annual returns amounted to 13.21%, 13.47%, and 15.3% 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 IWD would have resulted in a final balance of $26,666. This is a profit of $16,666 over 10 years and amounts to a compound annual growth rate (CAGR) of 11.40%.
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%.
IWD’s CAGR is 8.51 percentage points higher than that of VMBS and as a result, would have yielded $13,401 more on a $10,000 investment. Thus, IWD outperformed VMBS by 8.51% annually.
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