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MUB vs. DFAC: What’s The Difference?

The iShares National Muni Bond ETF (MUB) and the Dimensional U.S. Core Equity 2 ETF (DFAC) are both among the Top 100 ETFs. MUB is a iShares Muni National Interm fund and DFAC is a Dimensional Fund Advisors Large Blend fund. So, what’s the difference between MUB and DFAC? And which fund is better?

The expense ratio of MUB is 0.12 percentage points lower than DFAC’s (0.07% vs. 0.19%). MUB is mostly comprised of AA bonds while DFAC has a high exposure to the technology sector. Overall, MUB has provided lower returns than DFAC over the past 11 years.

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

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Summary

MUBDFAC
NameiShares National Muni Bond ETFDimensional U.S. Core Equity 2 ETF
CategoryMuni National IntermLarge Blend
IssueriSharesDimensional Fund Advisors
AUM22.71B13.53B
Avg. Return4.04%13.93%
Div. Yield1.96%1.0%
Expense Ratio0.07%0.19%

The iShares National Muni Bond ETF (MUB) is a Muni National Interm fund that is issued by iShares. It currently has 22.71B total assets under management and has yielded an average annual return of 4.04% over the past 10 years. The fund has a dividend yield of 1.96% with an expense ratio of 0.07%.

The Dimensional U.S. Core Equity 2 ETF (DFAC) is a Large Blend fund that is issued by Dimensional Fund Advisors. It currently has 13.53B total assets under management and has yielded an average annual return of 13.93% over the past 10 years. The fund has a dividend yield of 1.0% with an expense ratio of 0.19%.

MUB’s dividend yield is 0.96% higher than that of DFAC (1.96% vs. 1.0%). Also, MUB yielded on average 9.90% less per year over the past decade (4.04% vs. 13.93%). The expense ratio of MUB is 0.12 percentage points lower than DFAC’s (0.07% vs. 0.19%).

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Fund Composition

Holdings

MUB - Holdings

MUB Bond SectorsWeight
AA60.38%
AAA18.39%
A15.04%
BBB6.0%
Others0.17%
BB0.02%
Below B0.0%
B0.0%
US Government0.0%

MUB’s Top Bond Sectors are ratings of AA, AAA, A, BBB, and Others at 60.38%, 18.39%, 15.04%, 6.0%, and 0.17%. The fund is less weighted towards BB (0.02%), Below B (0.0%), and B (0.0%) rated bonds.

DFAC - Holdings

DFAC HoldingsWeight
Apple Inc4.7%
Microsoft Corp3.81%
Amazon.com Inc2.39%
Johnson & Johnson1.05%
Facebook Inc Class A1.05%
JPMorgan Chase & Co1.0%
Alphabet Inc Class C0.85%
Alphabet Inc Class A0.84%
Berkshire Hathaway Inc Class B0.75%
Visa Inc Class A0.74%

DFAC’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Johnson & Johnson, and Facebook Inc Class A at 4.7%, 3.81%, 2.39%, 1.05%, and 1.05%.

JPMorgan Chase & Co (1.0%), Alphabet Inc Class C (0.85%), and Alphabet Inc Class A (0.84%) have a slightly smaller but still significant weight. Berkshire Hathaway Inc Class B and Visa Inc Class A are also represented in the DFAC’s holdings at 0.75% and 0.74%.

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Risk Analysis

MUBDFAC
Mean Return0.321.19
R-squared9995.1
Std. Deviation3.6815.55
Alpha-0.46-2.75
Beta1.011.12
Sharpe Ratio0.880.88
Treynor Ratio3.211.85

The iShares National Muni Bond ETF (MUB) has a R-squared of 99 with a Standard Deviation of 3.68 and a Beta of 1.01. Its Alpha is -0.46 while MUB’s Treynor Ratio is 3.2. Furthermore, the fund has a Sharpe Ratio of 0.88 and a Mean Return of 0.32.

The Dimensional U.S. Core Equity 2 ETF (DFAC) has a Standard Deviation of 15.55 with a Alpha of -2.75 and a Sharpe Ratio of 0.88. Its Mean Return is 1.19 while DFAC’s R-squared is 95.1. Furthermore, the fund has a Beta of 1.12 and a Treynor Ratio of 11.85.

MUB’s Mean Return is 0.87 points lower than that of DFAC and its R-squared is 3.90 points higher. With a Standard Deviation of 3.68, MUB is slightly less volatile than DFAC. The Alpha and Beta of MUB are 2.29 points higher and 0.11 points lower than DFAC’s Alpha and Beta.

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Performance

Annual Returns

MUB vs. DFAC - Annual Returns

YearMUBDFAC
20204.87%15.8%
20197.28%29.54%
20180.86%-9.43%
20174.61%18.82%
20160.06%16.31%
20152.99%-2.53%
20148.61%9.56%
2013-3.26%37.55%
20126.14%17.93%
201110.85%-1.96%
20101.4%21.67%

MUB had its best year in 2011 with an annual return of 10.85%. MUB’s worst year over the past decade yielded -3.26% and occurred in 2013. In most years the iShares National Muni Bond ETF provided moderate returns such as in 2015, 2017, and 2020 where annual returns amounted to 2.99%, 4.61%, and 4.87% respectively.

The year 2013 was the strongest year for DFAC, returning 37.55% on an annual basis. The poorest year for DFAC in the last ten years was 2018, with a yield of -9.43%. Most years the Dimensional U.S. Core Equity 2 ETF has given investors modest returns, such as in 2020, 2016, and 2012, when gains were 15.8%, 16.31%, and 17.93% respectively.

Portfolio Growth

MUB vs. DFAC - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
MUB$10,000$15,3334.04%
DFAC$10,000$38,79613.93%

A $10,000 investment in MUB would have resulted in a final balance of $15,333. This is a profit of $5,333 over 11 years and amounts to a compound annual growth rate (CAGR) of 4.04%.

With a $10,000 investment in DFAC, the end total would have been $38,796. This equates to a $28,796 profit over 11 years and a compound annual growth rate (CAGR) of 13.93%.

MUB’s CAGR is 9.90 percentage points lower than that of DFAC and as a result, would have yielded $23,463 less on a $10,000 investment. Thus, MUB performed worse than DFAC by 9.90% annually.


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