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VB vs. IEF: What’s The Difference?

The Vanguard Small-Cap Index Fund ETF Shares (VB) and the iShares 7-10 Year Treasury Bond ETF (IEF) are both among the Top 100 ETFs. VB is a Vanguard Small Blend fund and IEF is a iShares Long Government fund. So, what’s the difference between VB and IEF? And which fund is better?

The expense ratio of VB is 0.10 percentage points lower than IEF’s (0.05% vs. 0.15%). VB also has a high exposure to the technology sector while IEF is mostly comprised of AAA bonds. Overall, VB has provided higher returns than IEF over the past ten years.

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

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Summary

VBIEF
NameVanguard Small-Cap Index Fund ETF SharesiShares 7-10 Year Treasury Bond ETF
CategorySmall BlendLong Government
IssuerVanguardiShares
AUM137.72B13.44B
Avg. Return14.25%5.06%
Div. Yield1.14%0.84%
Expense Ratio0.05%0.15%

The Vanguard Small-Cap Index Fund ETF Shares (VB) is a Small Blend fund that is issued by Vanguard. It currently has 137.72B total assets under management and has yielded an average annual return of 14.25% over the past 10 years. The fund has a dividend yield of 1.14% with an expense ratio of 0.05%.

The iShares 7-10 Year Treasury Bond ETF (IEF) is a Long Government fund that is issued by iShares. It currently has 13.44B total assets under management and has yielded an average annual return of 5.06% over the past 10 years. The fund has a dividend yield of 0.84% with an expense ratio of 0.15%.

VB’s dividend yield is 0.30% higher than that of IEF (1.14% vs. 0.84%). Also, VB yielded on average 9.19% more per year over the past decade (14.25% vs. 5.06%). The expense ratio of VB is 0.10 percentage points lower than IEF’s (0.05% vs. 0.15%).

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Fund Composition

Holdings

VB - Holdings

VB HoldingsWeight
Charles River Laboratories International Inc0.34%
Pool Corp0.32%
Bio-Techne Corp0.32%
Avantor Inc0.32%
PerkinElmer Inc0.31%
Diamondback Energy Inc0.31%
VICI Properties Inc Ordinary Shares0.3%
IDEX Corp0.3%
Entegris Inc0.3%
Novavax Inc0.29%

VB’s Top Holdings are Charles River Laboratories International Inc, Pool Corp, Bio-Techne Corp, Avantor Inc, and PerkinElmer Inc at 0.34%, 0.32%, 0.32%, 0.32%, and 0.31%.

Diamondback Energy Inc (0.31%), VICI Properties Inc Ordinary Shares (0.3%), and IDEX Corp (0.3%) have a slightly smaller but still significant weight. Entegris Inc and Novavax Inc are also represented in the VB’s holdings at 0.3% and 0.29%.

IEF - Holdings

IEF Bond SectorsWeight
AAA100.0%
Others0.0%
Below B0.0%
B0.0%
BB0.0%
BBB0.0%
A0.0%
AA0.0%
US Government0.0%

IEF’s Top Bond Sectors are ratings of AAA, Others, Below B, B, and BB at 100.0%, 0.0%, 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.

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Risk Analysis

VBIEF
Mean Return1.150.32
R-squared85.0377.56
Std. Deviation17.825.42
Alpha-4.02-1.2
Beta1.211.59
Sharpe Ratio0.740.6
Treynor Ratio10.151.97

The Vanguard Small-Cap Index Fund ETF Shares (VB) has a Mean Return of 1.15 with a Alpha of -4.02 and a Beta of 1.21. Its Standard Deviation is 17.82 while VB’s R-squared is 85.03. Furthermore, the fund has a Sharpe Ratio of 0.74 and a Treynor Ratio of 10.15.

The iShares 7-10 Year Treasury Bond ETF (IEF) has a Alpha of -1.2 with a Beta of 1.59 and a Mean Return of 0.32. Its Treynor Ratio is 1.97 while IEF’s Standard Deviation is 5.42. Furthermore, the fund has a Sharpe Ratio of 0.6 and a R-squared of 77.56.

VB’s Mean Return is 0.83 points higher than that of IEF and its R-squared is 7.47 points higher. With a Standard Deviation of 17.82, VB is slightly more volatile than IEF. The Alpha and Beta of VB are 2.82 points lower and 0.38 points lower than IEF’s Alpha and Beta.

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Performance

Annual Returns

VB vs. IEF - Annual Returns

YearVBIEF
202019.08%9.84%
201927.37%8.38%
2018-9.3%0.82%
201716.24%2.47%
201618.31%1.0%
2015-3.65%1.55%
20147.51%8.92%
201337.8%-6.12%
201218.22%4.06%
2011-2.68%15.46%
201027.89%9.29%

VB had its best year in 2013 with an annual return of 37.8%. VB’s worst year over the past decade yielded -9.3% and occurred in 2018. In most years the Vanguard Small-Cap Index Fund ETF Shares provided moderate returns such as in 2017, 2012, and 2016 where annual returns amounted to 16.24%, 18.22%, and 18.31% respectively.

The year 2011 was the strongest year for IEF, returning 15.46% on an annual basis. The poorest year for IEF in the last ten years was 2013, with a yield of -6.12%. Most years the iShares 7-10 Year Treasury Bond ETF has given investors modest returns, such as in 2017, 2012, and 2019, when gains were 2.47%, 4.06%, and 8.38% respectively.

Portfolio Growth

VB vs. IEF - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
VB$10,000$39,73414.25%
IEF$10,000$16,9365.06%

A $10,000 investment in VB would have resulted in a final balance of $39,734. This is a profit of $29,734 over 11 years and amounts to a compound annual growth rate (CAGR) of 14.25%.

With a $10,000 investment in IEF, the end total would have been $16,936. This equates to a $6,936 profit over 11 years and a compound annual growth rate (CAGR) of 5.06%.

VB’s CAGR is 9.19 percentage points higher than that of IEF and as a result, would have yielded $22,798 more on a $10,000 investment. Thus, VB outperformed IEF by 9.19% annually.


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