MUB vs. VGK: What’s The Difference?

The iShares National Muni Bond ETF (MUB) and the Vanguard FTSE Europe Index Fund ETF Shares (VGK) are both among the Top 100 ETFs. MUB is a iShares Muni National Interm fund and VGK is a Vanguard Europe Stock fund. So, what’s the difference between MUB and VGK? And which fund is better?

The expense ratio of MUB is 0.01 percentage points lower than VGK’s (0.07% vs. 0.08%). MUB is mostly comprised of AA bonds while VGK has a high exposure to the financial services sector. Overall, MUB has provided lower returns than VGK over the past 11 years.

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

Summary

MUB VGK
Name iShares National Muni Bond ETF Vanguard FTSE Europe Index Fund ETF Shares
Category Muni National Interm Europe Stock
Issuer iShares Vanguard
AUM 22.71B 25.7B
Avg. Return 4.04% 6.68%
Div. Yield 1.96% 2.52%
Expense Ratio 0.07% 0.08%

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 Vanguard FTSE Europe Index Fund ETF Shares (VGK) is a Europe Stock fund that is issued by Vanguard. It currently has 25.7B total assets under management and has yielded an average annual return of 6.68% over the past 10 years. The fund has a dividend yield of 2.52% with an expense ratio of 0.08%.

MUB’s dividend yield is 0.56% lower than that of VGK (1.96% vs. 2.52%). Also, MUB yielded on average 2.64% less per year over the past decade (4.04% vs. 6.68%). The expense ratio of MUB is 0.01 percentage points lower than VGK’s (0.07% vs. 0.08%).

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Fund Composition

Holdings

MUB - Holdings

MUB Bond Sectors Weight
AA 60.38%
AAA 18.39%
A 15.04%
BBB 6.0%
Others 0.17%
BB 0.02%
Below B 0.0%
B 0.0%
US Government 0.0%

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.

VGK - Holdings

VGK Holdings Weight
Nestle SA 2.82%
ASML Holding NV 2.2%
Roche Holding AG 2.13%
LVMH Moet Hennessy Louis Vuitton SE 1.58%
Novartis AG 1.55%
AstraZeneca PLC 1.27%
SAP SE 1.25%
Unilever PLC 1.23%
Novo Nordisk A/S B 1.09%
Siemens AG 0.96%

VGK’s Top Holdings are Nestle SA, ASML Holding NV, Roche Holding AG, LVMH Moet Hennessy Louis Vuitton SE, and Novartis AG at 2.82%, 2.2%, 2.13%, 1.58%, and 1.55%.

AstraZeneca PLC (1.27%), SAP SE (1.25%), and Unilever PLC (1.23%) have a slightly smaller but still significant weight. Novo Nordisk A/S B and Siemens AG are also represented in the VGK’s holdings at 1.09% and 0.96%.

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Risk Analysis

MUB VGK
Mean Return 0.32 0.61
R-squared 99 92.76
Std. Deviation 3.68 16.65
Alpha -0.46 0.45
Beta 1.01 1.06
Sharpe Ratio 0.88 0.4
Treynor Ratio 3.2 5.12

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

The Vanguard FTSE Europe Index Fund ETF Shares (VGK) has a Standard Deviation of 16.65 with a R-squared of 92.76 and a Alpha of 0.45. Its Sharpe Ratio is 0.4 while VGK’s Treynor Ratio is 5.12. Furthermore, the fund has a Mean Return of 0.61 and a Beta of 1.06.

MUB’s Mean Return is 0.29 points lower than that of VGK and its R-squared is 6.24 points higher. With a Standard Deviation of 3.68, MUB is slightly less volatile than VGK. The Alpha and Beta of MUB are 0.91 points lower and 0.05 points lower than VGK’s Alpha and Beta.

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Performance

Annual Returns

MUB vs. VGK - Annual Returns

Year MUB VGK
2020 4.87% 6.5%
2019 7.28% 24.26%
2018 0.86% -14.79%
2017 4.61% 27.06%
2016 0.06% -0.59%
2015 2.99% -1.87%
2014 8.61% -6.56%
2013 -3.26% 24.93%
2012 6.14% 21.01%
2011 10.85% -11.49%
2010 1.4% 5.01%

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 2017 was the strongest year for VGK, returning 27.06% on an annual basis. The poorest year for VGK in the last ten years was 2018, with a yield of -14.79%. Most years the Vanguard FTSE Europe Index Fund ETF Shares has given investors modest returns, such as in 2016, 2010, and 2020, when gains were -0.59%, 5.01%, and 6.5% respectively.

Portfolio Growth

MUB vs. VGK - Portfolio Growth

Fund Initial Balance Final Balance CAGR
MUB $10,000 $15,333 4.04%
VGK $10,000 $18,350 6.68%

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 VGK, the end total would have been $18,350. This equates to a $8,350 profit over 11 years and a compound annual growth rate (CAGR) of 6.68%.

MUB’s CAGR is 2.64 percentage points lower than that of VGK and as a result, would have yielded $3,017 less on a $10,000 investment. Thus, MUB performed worse than VGK by 2.64% annually.


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