IWP vs. VMBS: What’s The Difference?

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

The expense ratio of IWP is 0.19 percentage points higher than VMBS’s (0.24% vs. 0.05%). IWP also has a high exposure to the technology sector while VMBS is mostly comprised of AAA bonds. Overall, IWP has provided higher returns than VMBS over the past 10 years.

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

Summary

IWP VMBS
Name iShares Russell Mid-Cap Growth ETF Vanguard Mortgage-Backed Securities Index Fund ETF Shares
Category Mid-Cap Growth Intermediate Government
Issuer iShares Vanguard
AUM 15.7B 16.61B
Avg. Return 16.75% 2.89%
Div. Yield 0.26% 1.23%
Expense Ratio 0.24% 0.05%

The iShares Russell Mid-Cap Growth ETF (IWP) is a Mid-Cap Growth fund that is issued by iShares. It currently has 15.7B total assets under management and has yielded an average annual return of 16.75% over the past 10 years. The fund has a dividend yield of 0.26% with an expense ratio of 0.24%.

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%.

IWP’s dividend yield is 0.97% lower than that of VMBS (0.26% vs. 1.23%). Also, IWP yielded on average 13.86% more per year over the past decade (16.75% vs. 2.89%). The expense ratio of IWP is 0.19 percentage points higher than VMBS’s (0.24% vs. 0.05%).

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Fund Composition

Holdings

IWP - Holdings

IWP Holdings Weight
IDEXX Laboratories Inc 1.3%
DocuSign Inc 1.3%
Roku Inc Class A 1.29%
Match Group Inc 1.06%
Chipotle Mexican Grill Inc 1.06%
Pinterest Inc 1.05%
Veeva Systems Inc Class A 1.04%
Palantir Technologies Inc Ordinary Shares – Class A 1.04%
Lululemon Athletica Inc 1.01%
DexCom Inc 1.0%

IWP’s Top Holdings are IDEXX Laboratories Inc, DocuSign Inc, Roku Inc Class A, Match Group Inc, and Chipotle Mexican Grill Inc at 1.3%, 1.3%, 1.29%, 1.06%, and 1.06%.

Pinterest Inc (1.05%), Veeva Systems Inc Class A (1.04%), and Palantir Technologies Inc Ordinary Shares – Class A (1.04%) have a slightly smaller but still significant weight. Lululemon Athletica Inc and DexCom Inc are also represented in the IWP’s holdings at 1.01% and 1.0%.

VMBS - Holdings

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.

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Risk Analysis

IWP VMBS
Mean Return 1.27 0.21
R-squared 87.01 65.78
Std. Deviation 16.05 2.02
Alpha -1.03 0.37
Beta 1.1 0.54
Sharpe Ratio 0.91 0.94
Treynor Ratio 12.98 3.47

The iShares Russell Mid-Cap Growth ETF (IWP) has a Treynor Ratio of 12.98 with a Sharpe Ratio of 0.91 and a Mean Return of 1.27. Its Standard Deviation is 16.05 while IWP’s R-squared is 87.01. Furthermore, the fund has a Alpha of -1.03 and a Beta of 1.1.

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

IWP’s Mean Return is 1.06 points higher than that of VMBS and its R-squared is 21.23 points higher. With a Standard Deviation of 16.05, IWP is slightly more volatile than VMBS. The Alpha and Beta of IWP are 1.40 points lower and 0.56 points higher than VMBS’s Alpha and Beta.

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Performance

Annual Returns

IWP vs. VMBS - Annual Returns

Year IWP VMBS
2020 35.29% 3.77%
2019 35.14% 6.17%
2018 -4.95% 0.87%
2017 24.98% 2.37%
2016 7.15% 1.43%
2015 -0.39% 1.43%
2014 11.68% 5.81%
2013 35.44% -1.28%
2012 15.62% 2.47%
2011 -1.82% 5.89%
2010 26.1% 5.24%

IWP had its best year in 2013 with an annual return of 35.44%. IWP’s worst year over the past decade yielded -4.95% and occurred in 2018. In most years the iShares Russell Mid-Cap Growth ETF provided moderate returns such as in 2014, 2012, and 2017 where annual returns amounted to 11.68%, 15.62%, and 24.98% 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

IWP vs. VMBS - Portfolio Growth

Fund Initial Balance Final Balance CAGR
IWP $10,000 $39,802 16.75%
VMBS $10,000 $13,265 2.89%

A $10,000 investment in IWP would have resulted in a final balance of $39,802. This is a profit of $29,802 over 10 years and amounts to a compound annual growth rate (CAGR) of 16.75%.

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%.

IWP’s CAGR is 13.86 percentage points higher than that of VMBS and as a result, would have yielded $26,537 more on a $10,000 investment. Thus, IWP outperformed VMBS by 13.86% annually.


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