The Vanguard Small-Cap Index Fund ETF Shares (VB) and the iShares 20+ Year Treasury Bond ETF (TLT) are both among the Top 100 ETFs. VB is a Vanguard Small Blend fund and TLT is a iShares Long Government fund. So, what’s the difference between VB and TLT? And which fund is better?
The expense ratio of VB is 0.10 percentage points lower than TLT’s (0.05% vs. 0.15%). VB also has a high exposure to the technology sector while TLT is mostly comprised of AAA bonds. Overall, VB has provided higher returns than TLT over the past ten years.
In this article, we’ll compare VB vs. TLT. We’ll look at risk metrics and performance, as well as at their portfolio growth and fund composition. Moreover, I’ll also discuss VB’s and TLT’s annual returns, holdings, and industry exposure and examine how these affect their overall returns.
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|Name||Vanguard Small-Cap Index Fund ETF Shares||iShares 20+ Year Treasury Bond ETF|
|Category||Small Blend||Long Government|
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 20+ Year Treasury Bond ETF (TLT) is a Long Government fund that is issued by iShares. It currently has 15.15B total assets under management and has yielded an average annual return of 9.00% over the past 10 years. The fund has a dividend yield of 1.5% with an expense ratio of 0.15%.
VB’s dividend yield is 0.36% lower than that of TLT (1.14% vs. 1.5%). Also, VB yielded on average 5.26% more per year over the past decade (14.25% vs. 9.00%). The expense ratio of VB is 0.10 percentage points lower than TLT’s (0.05% vs. 0.15%).
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|Charles River Laboratories International Inc||0.34%|
|Diamondback Energy Inc||0.31%|
|VICI Properties Inc Ordinary Shares||0.3%|
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%.
|TLT Bond Sectors||Weight|
TLT’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.
The Vanguard Small-Cap Index Fund ETF Shares (VB) has a Standard Deviation of 17.82 with a Beta of 1.21 and a Mean Return of 1.15. Its Sharpe Ratio is 0.74 while VB’s R-squared is 85.03. Furthermore, the fund has a Alpha of -4.02 and a Treynor Ratio of 10.15.
The iShares 20+ Year Treasury Bond ETF (TLT) has a Beta of 3.54 with a Treynor Ratio of 1.82 and a Mean Return of 0.63. Its Standard Deviation is 12.76 while TLT’s Alpha is -2.83. Furthermore, the fund has a Sharpe Ratio of 0.55 and a R-squared of 68.76.
VB’s Mean Return is 0.52 points higher than that of TLT and its R-squared is 16.27 points higher. With a Standard Deviation of 17.82, VB is slightly more volatile than TLT. The Alpha and Beta of VB are 1.19 points lower and 2.33 points lower than TLT’s Alpha and Beta.
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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 TLT, returning 33.6% on an annual basis. The poorest year for TLT in the last ten years was 2013, with a yield of -13.91%. Most years the iShares 20+ Year Treasury Bond ETF has given investors modest returns, such as in 2012, 2017, and 2010, when gains were 3.25%, 8.92%, and 9.25% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
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 TLT, the end total would have been $23,809. This equates to a $13,809 profit over 11 years and a compound annual growth rate (CAGR) of 9.00%.
VB’s CAGR is 5.26 percentage points higher than that of TLT and as a result, would have yielded $15,925 more on a $10,000 investment. Thus, VB outperformed TLT by 5.26% annually.
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