The iShares MSCI USA Momentum Factor ETF (MTUM) and the Vanguard Mortgage-Backed Securities Index Fund ETF Shares (VMBS) are both among the Top 100 ETFs. MTUM is a iShares Large Growth fund and VMBS is a Vanguard Intermediate Government fund. So, what’s the difference between MTUM and VMBS? And which fund is better?
The expense ratio of MTUM is 0.10 percentage points higher than VMBS’s (0.15% vs. 0.05%). MTUM also has a high exposure to the financial services sector while VMBS is mostly comprised of AAA bonds. Overall, MTUM has provided higher returns than VMBS over the past 7 years.
In this article, we’ll compare MTUM vs. VMBS. We’ll look at industry exposure and fund composition, as well as at their annual returns and risk metrics. Moreover, I’ll also discuss MTUM’s and VMBS’s holdings, portfolio growth, and performance and examine how these affect their overall returns.
|Name||iShares MSCI USA Momentum Factor ETF||Vanguard Mortgage-Backed Securities Index Fund ETF Shares|
|Category||Large Growth||Intermediate Government|
The iShares MSCI USA Momentum Factor ETF (MTUM) is a Large Growth fund that is issued by iShares. It currently has 14.53B total assets under management and has yielded an average annual return of 17.37% over the past 10 years. The fund has a dividend yield of 0.44% 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%.
MTUM’s dividend yield is 0.79% lower than that of VMBS (0.44% vs. 1.23%). Also, MTUM yielded on average 14.48% more per year over the past decade (17.37% vs. 2.89%). The expense ratio of MTUM is 0.10 percentage points higher than VMBS’s (0.15% vs. 0.05%).
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|The Walt Disney Co||4.39%|
|JPMorgan Chase & Co||4.35%|
|Berkshire Hathaway Inc Class B||4.34%|
|Bank of America Corp||3.81%|
|PayPal Holdings Inc||3.76%|
|Wells Fargo & Co||3.05%|
|Applied Materials Inc||3.05%|
|Alphabet Inc Class C||2.84%|
MTUM’s Top Holdings are Tesla Inc, The Walt Disney Co, JPMorgan Chase & Co, Berkshire Hathaway Inc Class B, and Bank of America Corp at 5.63%, 4.39%, 4.35%, 4.34%, and 3.81%.
PayPal Holdings Inc (3.76%), Wells Fargo & Co (3.05%), and Applied Materials Inc (3.05%) have a slightly smaller but still significant weight. Moderna Inc and Alphabet Inc Class C are also represented in the MTUM’s holdings at 2.89% and 2.84%.
|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 MSCI USA Momentum Factor ETF (MTUM) has a Sharpe Ratio of 0 with a Mean Return of 0 and a Alpha of 0. Its Beta is 0 while MTUM’s R-squared is 0. Furthermore, the fund has a Standard Deviation of 0 and a Treynor Ratio of 0.
The Vanguard Mortgage-Backed Securities Index Fund ETF Shares (VMBS) has a R-squared of 65.78 with a Standard Deviation of 2.02 and a Alpha of 0.37. Its Sharpe Ratio is 0.94 while VMBS’s Beta is 0.54. Furthermore, the fund has a Mean Return of 0.21 and a Treynor Ratio of 3.47.
MTUM’s Mean Return is 0.21 points lower than that of VMBS and its R-squared is 65.78 points lower. With a Standard Deviation of 0, MTUM is slightly less volatile than VMBS. The Alpha and Beta of MTUM are 0.37 points lower and 0.54 points lower than VMBS’s Alpha and Beta.
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MTUM had its best year in 2017 with an annual return of 37.6%. MTUM’s worst year over the past decade yielded -1.77% and occurred in 2018. In most years the iShares MSCI USA Momentum Factor ETF provided moderate returns such as in 2010, 2016, and 2015 where annual returns amounted to 0.0%, 4.89%, and 9.12% 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 MTUM would have resulted in a final balance of $29,301. This is a profit of $19,301 over 7 years and amounts to a compound annual growth rate (CAGR) of 17.37%.
With a $10,000 investment in VMBS, the end total would have been $12,384. This equates to a $2,384 profit over 7 years and a compound annual growth rate (CAGR) of 2.89%.
MTUM’s CAGR is 14.48 percentage points higher than that of VMBS and as a result, would have yielded $16,917 more on a $10,000 investment. Thus, MTUM outperformed VMBS by 14.48% annually.
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