The iShares Russell 2000 ETF (IWM) and the iShares MBS ETF (MBB) are both among the Top 100 ETFs. IWM is a iShares Small Blend fund and MBB is a iShares Intermediate Government fund. So, what’s the difference between IWM and MBB? And which fund is better?
The expense ratio of IWM is 0.13 percentage points higher than MBB’s (0.19% vs. 0.06%). IWM also has a high exposure to the healthcare sector while MBB is mostly comprised of AAA bonds. Overall, IWM has provided higher returns than MBB over the past ten years.
In this article, we’ll compare IWM vs. MBB. We’ll look at risk metrics and annual returns, as well as at their industry exposure and performance. Moreover, I’ll also discuss IWM’s and MBB’s portfolio growth, holdings, and fund composition and examine how these affect their overall returns.
Summary
| IWM | MBB | |
| Name | iShares Russell 2000 ETF | iShares MBS ETF |
| Category | Small Blend | Intermediate Government |
| Issuer | iShares | iShares |
| AUM | 66.48B | 25.69B |
| Avg. Return | 13.52% | 3.08% |
| Div. Yield | 0.86% | 1.88% |
| Expense Ratio | 0.19% | 0.06% |
The iShares Russell 2000 ETF (IWM) is a Small Blend fund that is issued by iShares. It currently has 66.48B total assets under management and has yielded an average annual return of 13.52% over the past 10 years. The fund has a dividend yield of 0.86% with an expense ratio of 0.19%.
The iShares MBS ETF (MBB) is a Intermediate Government fund that is issued by iShares. It currently has 25.69B total assets under management and has yielded an average annual return of 3.08% over the past 10 years. The fund has a dividend yield of 1.88% with an expense ratio of 0.06%.
IWM’s dividend yield is 1.02% lower than that of MBB (0.86% vs. 1.88%). Also, IWM yielded on average 10.45% more per year over the past decade (13.52% vs. 3.08%). The expense ratio of IWM is 0.13 percentage points higher than MBB’s (0.19% vs. 0.06%).
Fund Composition
Holdings
| IWM Holdings | Weight |
| AMC Entertainment Holdings Inc Class A | 0.52% |
| Intellia Therapeutics Inc | 0.33% |
| Crocs Inc | 0.3% |
| BlackRock Cash Funds Treasury SL Agency | 0.29% |
| Tenet Healthcare Corp | 0.26% |
| Lattice Semiconductor Corp | 0.26% |
| Tetra Tech Inc | 0.25% |
| II-VI Inc | 0.25% |
| EastGroup Properties Inc | 0.24% |
| Arrowhead Pharmaceuticals Inc | 0.24% |
IWM’s Top Holdings are AMC Entertainment Holdings Inc Class A, Intellia Therapeutics Inc, Crocs Inc, BlackRock Cash Funds Treasury SL Agency, and Tenet Healthcare Corp at 0.52%, 0.33%, 0.3%, 0.29%, and 0.26%.
Lattice Semiconductor Corp (0.26%), Tetra Tech Inc (0.25%), and II-VI Inc (0.25%) have a slightly smaller but still significant weight. EastGroup Properties Inc and Arrowhead Pharmaceuticals Inc are also represented in the IWM’s holdings at 0.24% and 0.24%.
| MBB Bond Sectors | Weight |
| AAA | 99.51% |
| Others | 0.49% |
| Below B | 0.0% |
| B | 0.0% |
| BB | 0.0% |
| BBB | 0.0% |
| A | 0.0% |
| AA | 0.0% |
| US Government | 0.0% |
MBB’s Top Bond Sectors are ratings of AAA, Others, Below B, B, and BB at 99.51%, 0.49%, 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.
Risk Analysis
| IWM | MBB | |
| Mean Return | 1.12 | 0.2 |
| R-squared | 77.73 | 74.38 |
| Std. Deviation | 18.87 | 2.12 |
| Alpha | -5.12 | 0.14 |
| Beta | 1.23 | 0.6 |
| Sharpe Ratio | 0.68 | 0.87 |
| Treynor Ratio | 9.56 | 3.02 |
The iShares Russell 2000 ETF (IWM) has a Treynor Ratio of 9.56 with a Beta of 1.23 and a R-squared of 77.73. Its Standard Deviation is 18.87 while IWM’s Sharpe Ratio is 0.68. Furthermore, the fund has a Alpha of -5.12 and a Mean Return of 1.12.
The iShares MBS ETF (MBB) has a Standard Deviation of 2.12 with a Beta of 0.6 and a Mean Return of 0.2. Its Treynor Ratio is 3.02 while MBB’s Alpha is 0.14. Furthermore, the fund has a Sharpe Ratio of 0.87 and a R-squared of 74.38.
IWM’s Mean Return is 0.92 points higher than that of MBB and its R-squared is 3.35 points higher. With a Standard Deviation of 18.87, IWM is slightly more volatile than MBB. The Alpha and Beta of IWM are 5.26 points lower and 0.63 points higher than MBB’s Alpha and Beta.
Performance
Annual Returns
| Year | IWM | MBB |
| 2020 | 19.89% | 4.03% |
| 2019 | 25.42% | 6.27% |
| 2018 | -11.02% | 0.81% |
| 2017 | 14.66% | 2.37% |
| 2016 | 21.36% | 1.28% |
| 2015 | -4.33% | 1.28% |
| 2014 | 4.94% | 6.16% |
| 2013 | 38.85% | -1.92% |
| 2012 | 16.39% | 2.23% |
| 2011 | -4.19% | 5.88% |
| 2010 | 26.76% | 5.44% |
IWM had its best year in 2013 with an annual return of 38.85%. IWM’s worst year over the past decade yielded -11.02% and occurred in 2018. In most years the iShares Russell 2000 ETF provided moderate returns such as in 2017, 2012, and 2020 where annual returns amounted to 14.66%, 16.39%, and 19.89% respectively.
The year 2019 was the strongest year for MBB, returning 6.27% on an annual basis. The poorest year for MBB in the last ten years was 2013, with a yield of -1.92%. Most years the iShares MBS ETF has given investors modest returns, such as in 2012, 2017, and 2020, when gains were 2.23%, 2.37%, and 4.03% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| IWM | $10,000 | $36,686 | 13.52% |
| MBB | $10,000 | $13,906 | 3.08% |
A $10,000 investment in IWM would have resulted in a final balance of $36,686. This is a profit of $26,686 over 11 years and amounts to a compound annual growth rate (CAGR) of 13.52%.
With a $10,000 investment in MBB, the end total would have been $13,906. This equates to a $3,906 profit over 11 years and a compound annual growth rate (CAGR) of 3.08%.
IWM’s CAGR is 10.45 percentage points higher than that of MBB and as a result, would have yielded $22,780 more on a $10,000 investment. Thus, IWM outperformed MBB by 10.45% 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)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.
I believe that money is just a means to an end: to be free to spend your time as you wish, to maximize your positive impact on the world.
