The iShares Russell 1000 Growth ETF (IWF) and the Vanguard Mortgage-Backed Securities Index Fund ETF Shares (VMBS) are both among the Top 100 ETFs. IWF is a iShares Large Growth fund and VMBS is a Vanguard Intermediate Government fund. So, what’s the difference between IWF and VMBS? And which fund is better?
The expense ratio of IWF is 0.14 percentage points higher than VMBS’s (0.19% vs. 0.05%). IWF also has a high exposure to the technology sector while VMBS is mostly comprised of AAA bonds. Overall, IWF has provided higher returns than VMBS over the past ten years.
In this article, we’ll compare IWF vs. VMBS. We’ll look at performance and annual returns, as well as at their holdings and fund composition. Moreover, I’ll also discuss IWF’s and VMBS’s portfolio growth, industry exposure, and risk metrics and examine how these affect their overall returns.
Summary
| IWF | VMBS | |
| Name | iShares Russell 1000 Growth ETF | Vanguard Mortgage-Backed Securities Index Fund ETF Shares |
| Category | Large Growth | Intermediate Government |
| Issuer | iShares | Vanguard |
| AUM | 72.16B | 16.61B |
| Avg. Return | 17.72% | 2.89% |
| Div. Yield | 0.52% | 1.23% |
| Expense Ratio | 0.19% | 0.05% |
The iShares Russell 1000 Growth ETF (IWF) is a Large Growth fund that is issued by iShares. It currently has 72.16B total assets under management and has yielded an average annual return of 17.72% over the past 10 years. The fund has a dividend yield of 0.52% 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%.
IWF’s dividend yield is 0.71% lower than that of VMBS (0.52% vs. 1.23%). Also, IWF yielded on average 14.83% more per year over the past decade (17.72% vs. 2.89%). The expense ratio of IWF is 0.14 percentage points higher than VMBS’s (0.19% vs. 0.05%).
Fund Composition
Holdings
| IWF Holdings | Weight |
| Apple Inc | 10.51% |
| Microsoft Corp | 9.85% |
| Amazon.com Inc | 6.63% |
| Facebook Inc Class A | 3.91% |
| Alphabet Inc Class A | 3.2% |
| Alphabet Inc Class C | 3.03% |
| Tesla Inc | 2.45% |
| NVIDIA Corp | 2.14% |
| Visa Inc Class A | 1.91% |
| The Home Depot Inc | 1.62% |
IWF’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc Class A, and Alphabet Inc Class A at 10.51%, 9.85%, 6.63%, 3.91%, and 3.2%.
Alphabet Inc Class C (3.03%), Tesla Inc (2.45%), and NVIDIA Corp (2.14%) have a slightly smaller but still significant weight. Visa Inc Class A and The Home Depot Inc are also represented in the IWF’s holdings at 1.91% and 1.62%.
| 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
| IWF | VMBS | |
| Mean Return | 1.48 | 0.21 |
| R-squared | 92.93 | 65.78 |
| Std. Deviation | 14.42 | 2.02 |
| Alpha | 2.16 | 0.37 |
| Beta | 1.03 | 0.54 |
| Sharpe Ratio | 1.19 | 0.94 |
| Treynor Ratio | 17.1 | 3.47 |
The iShares Russell 1000 Growth ETF (IWF) has a Treynor Ratio of 17.1 with a Mean Return of 1.48 and a Standard Deviation of 14.42. Its R-squared is 92.93 while IWF’s Alpha is 2.16. Furthermore, the fund has a Sharpe Ratio of 1.19 and a Beta of 1.03.
The Vanguard Mortgage-Backed Securities Index Fund ETF Shares (VMBS) has a Alpha of 0.37 with a Treynor Ratio of 3.47 and a R-squared of 65.78. Its Sharpe Ratio is 0.94 while VMBS’s Mean Return is 0.21. Furthermore, the fund has a Beta of 0.54 and a Standard Deviation of 2.02.
IWF’s Mean Return is 1.27 points higher than that of VMBS and its R-squared is 27.15 points higher. With a Standard Deviation of 14.42, IWF is slightly more volatile than VMBS. The Alpha and Beta of IWF are 1.79 points higher and 0.49 points higher than VMBS’s Alpha and Beta.
Performance
Annual Returns
| Year | IWF | VMBS |
| 2020 | 38.21% | 3.77% |
| 2019 | 36.08% | 6.17% |
| 2018 | -1.68% | 0.87% |
| 2017 | 29.96% | 2.37% |
| 2016 | 6.92% | 1.43% |
| 2015 | 5.48% | 1.43% |
| 2014 | 12.84% | 5.81% |
| 2013 | 33.19% | -1.28% |
| 2012 | 15.03% | 2.47% |
| 2011 | 2.47% | 5.89% |
| 2010 | 16.47% | 5.24% |
IWF had its best year in 2020 with an annual return of 38.21%. IWF’s worst year over the past decade yielded -1.68% and occurred in 2018. In most years the iShares Russell 1000 Growth ETF provided moderate returns such as in 2014, 2012, and 2010 where annual returns amounted to 12.84%, 15.03%, and 16.47% 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 |
| IWF | $10,000 | $48,012 | 17.72% |
| VMBS | $10,000 | $13,265 | 2.89% |
A $10,000 investment in IWF would have resulted in a final balance of $48,012. This is a profit of $38,012 over 10 years and amounts to a compound annual growth rate (CAGR) of 17.72%.
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%.
IWF’s CAGR is 14.83 percentage points higher than that of VMBS and as a result, would have yielded $34,747 more on a $10,000 investment. Thus, IWF outperformed VMBS by 14.83% annually.
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