VBR vs. VHT: What’s The Difference?

The Vanguard Small-Cap Value Index Fund ETF Shares (VBR) and the Vanguard Health Care Index Fund ETF Shares (VHT) are both among the Top 100 ETFs. VBR is a Vanguard Small Value fund and VHT is a Vanguard Health fund. So, what’s the difference between VBR and VHT? And which fund is better?

The expense ratio of VBR is 0.03 percentage points lower than VHT’s (0.07% vs. 0.1%). VBR also has a higher exposure to the financial services sector and a higher standard deviation. Overall, VBR has provided lower returns than VHT over the past 11 years.

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

Summary

VBR VHT
Name Vanguard Small-Cap Value Index Fund ETF Shares Vanguard Health Care Index Fund ETF Shares
Category Small Value Health
Issuer Vanguard Vanguard
AUM 48.08B 17.94B
Avg. Return 12.28% 16.04%
Div. Yield 1.6% 1.15%
Expense Ratio 0.07% 0.1%

The Vanguard Small-Cap Value Index Fund ETF Shares (VBR) is a Small Value fund that is issued by Vanguard. It currently has 48.08B total assets under management and has yielded an average annual return of 12.28% over the past 10 years. The fund has a dividend yield of 1.6% with an expense ratio of 0.07%.

The Vanguard Health Care Index Fund ETF Shares (VHT) is a Health fund that is issued by Vanguard. It currently has 17.94B total assets under management and has yielded an average annual return of 16.04% over the past 10 years. The fund has a dividend yield of 1.15% with an expense ratio of 0.1%.

VBR’s dividend yield is 0.45% higher than that of VHT (1.6% vs. 1.15%). Also, VBR yielded on average 3.76% less per year over the past decade (12.28% vs. 16.04%). The expense ratio of VBR is 0.03 percentage points lower than VHT’s (0.07% vs. 0.1%).

Fund Composition

Industry Exposure

VBR vs. VHT - Industry Exposure

VBR VHT
Technology 8.39% 0.05%
Industrials 18.44% 0.05%
Energy 5.15% 0.0%
Communication Services 1.77% 0.0%
Utilities 3.65% 0.0%
Healthcare 7.16% 99.57%
Consumer Defensive 4.36% 0.0%
Real Estate 10.92% 0.0%
Financial Services 20.04% 0.02%
Consumer Cyclical 13.82% 0.0%
Basic Materials 6.31% 0.31%

The Vanguard Small-Cap Value Index Fund ETF Shares (VBR) has the most exposure to the Financial Services sector at 20.04%. This is followed by Industrials and Consumer Cyclical at 18.44% and 13.82% respectively. Utilities (3.65%), Consumer Defensive (4.36%), and Energy (5.15%) only make up 13.16% of the fund’s total assets.

VBR’s mid-section with moderate exposure is comprised of Basic Materials, Healthcare, Technology, Real Estate, and Consumer Cyclical stocks at 6.31%, 7.16%, 8.39%, 10.92%, and 13.82%.

The Vanguard Health Care Index Fund ETF Shares (VHT) has the most exposure to the Healthcare sector at 99.57%. This is followed by Basic Materials and Technology at 0.31% and 0.05% respectively. Real Estate (0.0%), Consumer Defensive (0.0%), and Utilities (0.0%) only make up 0.00% of the fund’s total assets.

VHT’s mid-section with moderate exposure is comprised of Communication Services, Energy, Financial Services, Industrials, and Technology stocks at 0.0%, 0.0%, 0.02%, 0.05%, and 0.05%.

VBR is 20.02% more exposed to the Financial Services sector than VHT (20.04% vs 0.02%). VBR’s exposure to Industrials and Consumer Cyclical stocks is 18.39% higher and 13.82% higher respectively (18.44% vs. 0.05% and 13.82% vs. 0.0%). In total, Utilities, Consumer Defensive, and Energy also make up 13.16% more of the fund’s holdings compared to VHT (13.16% vs. 0.00%).

Holdings

VBR - Holdings

VBR Holdings Weight
Diamondback Energy Inc 0.55%
VICI Properties Inc Ordinary Shares 0.54%
IDEX Corp 0.54%
Nuance Communications Inc 0.5%
Molina Healthcare Inc 0.48%
Signature Bank 0.46%
Novavax Inc 0.44%
Howmet Aerospace Inc 0.44%
Apollo Global Management Inc Class A 0.42%
Brown & Brown Inc 0.41%

VBR’s Top Holdings are Diamondback Energy Inc, VICI Properties Inc Ordinary Shares, IDEX Corp, Nuance Communications Inc, and Molina Healthcare Inc at 0.55%, 0.54%, 0.54%, 0.5%, and 0.48%.

Signature Bank (0.46%), Novavax Inc (0.44%), and Howmet Aerospace Inc (0.44%) have a slightly smaller but still significant weight. Apollo Global Management Inc Class A and Brown & Brown Inc are also represented in the VBR’s holdings at 0.42% and 0.41%.

VHT - Holdings

VHT Holdings Weight
Johnson & Johnson 7.34%
UnitedHealth Group Inc 6.44%
Pfizer Inc 3.7%
Abbott Laboratories 3.48%
Thermo Fisher Scientific Inc 3.37%
AbbVie Inc 3.37%
Merck & Co Inc 3.33%
Eli Lilly and Co 3.17%
Danaher Corp 2.91%
Medtronic PLC 2.83%

VHT’s Top Holdings are Johnson & Johnson, UnitedHealth Group Inc, Pfizer Inc, Abbott Laboratories, and Thermo Fisher Scientific Inc at 7.34%, 6.44%, 3.7%, 3.48%, and 3.37%.

AbbVie Inc (3.37%), Merck & Co Inc (3.33%), and Eli Lilly and Co (3.17%) have a slightly smaller but still significant weight. Danaher Corp and Medtronic PLC are also represented in the VHT’s holdings at 2.91% and 2.83%.

Risk Analysis

VBR VHT
Mean Return 1.08 1.33
R-squared 82.2 59.86
Std. Deviation 18.37 13.58
Alpha -5.09 7.99
Beta 1.23 0.75
Sharpe Ratio 0.67 1.13
Treynor Ratio 9.15 20.74

The Vanguard Small-Cap Value Index Fund ETF Shares (VBR) has a Mean Return of 1.08 with a Sharpe Ratio of 0.67 and a Standard Deviation of 18.37. Its R-squared is 82.2 while VBR’s Alpha is -5.09. Furthermore, the fund has a Beta of 1.23 and a Treynor Ratio of 9.15.

The Vanguard Health Care Index Fund ETF Shares (VHT) has a Alpha of 7.99 with a Sharpe Ratio of 1.13 and a R-squared of 59.86. Its Beta is 0.75 while VHT’s Standard Deviation is 13.58. Furthermore, the fund has a Treynor Ratio of 20.74 and a Mean Return of 1.33.

VBR’s Mean Return is 0.25 points lower than that of VHT and its R-squared is 22.34 points higher. With a Standard Deviation of 18.37, VBR is slightly more volatile than VHT. The Alpha and Beta of VBR are 13.08 points lower and 0.48 points higher than VHT’s Alpha and Beta.

Performance

Annual Returns

VBR vs. VHT - Annual Returns

Year VBR VHT
2020 5.82% 18.21%
2019 22.76% 21.97%
2018 -12.22% 5.55%
2017 11.79% 23.34%
2016 24.8% -3.33%
2015 -4.67% 7.22%
2014 10.55% 25.38%
2013 36.57% 42.67%
2012 18.78% 19.1%
2011 -4.05% 10.57%
2010 24.97% 5.75%

VBR had its best year in 2013 with an annual return of 36.57%. VBR’s worst year over the past decade yielded -12.22% and occurred in 2018. In most years the Vanguard Small-Cap Value Index Fund ETF Shares provided moderate returns such as in 2014, 2017, and 2012 where annual returns amounted to 10.55%, 11.79%, and 18.78% respectively.

The year 2013 was the strongest year for VHT, returning 42.67% on an annual basis. The poorest year for VHT in the last ten years was 2016, with a yield of -3.33%. Most years the Vanguard Health Care Index Fund ETF Shares has given investors modest returns, such as in 2011, 2020, and 2012, when gains were 10.57%, 18.21%, and 19.1% respectively.

Portfolio Growth

VBR vs. VHT - Portfolio Growth

Fund Initial Balance Final Balance CAGR
VBR $10,000 $32,611 12.28%
VHT $10,000 $48,464 16.04%

A $10,000 investment in VBR would have resulted in a final balance of $32,611. This is a profit of $22,611 over 11 years and amounts to a compound annual growth rate (CAGR) of 12.28%.

With a $10,000 investment in VHT, the end total would have been $48,464. This equates to a $38,464 profit over 11 years and a compound annual growth rate (CAGR) of 16.04%.

VBR’s CAGR is 3.76 percentage points lower than that of VHT and as a result, would have yielded $15,853 less on a $10,000 investment. Thus, VBR performed worse than VHT by 3.76% annually.


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