The Vanguard FTSE Developed Markets Index Fund ETF Shares (VEA) and the iShares 20+ Year Treasury Bond ETF (TLT) are both among the Top 100 ETFs. VEA is a Vanguard Foreign Large Blend fund and TLT is a iShares Long Government fund. So, what’s the difference between VEA and TLT? And which fund is better?
The expense ratio of VEA is 0.10 percentage points lower than TLT’s (0.05% vs. 0.15%). VEA also has a high exposure to the financial services sector while TLT is mostly comprised of AAA bonds. Overall, VEA has provided lower returns than TLT over the past ten years.
In this article, we’ll compare VEA vs. TLT. We’ll look at risk metrics and industry exposure, as well as at their performance and holdings. Moreover, I’ll also discuss VEA’s and TLT’s portfolio growth, fund composition, and annual returns and examine how these affect their overall returns.
Summary
| VEA | TLT | |
| Name | Vanguard FTSE Developed Markets Index Fund ETF Shares | iShares 20+ Year Treasury Bond ETF |
| Category | Foreign Large Blend | Long Government |
| Issuer | Vanguard | iShares |
| AUM | 157.48B | 15.15B |
| Avg. Return | 7.05% | 9.00% |
| Div. Yield | 2.49% | 1.5% |
| Expense Ratio | 0.05% | 0.15% |
The Vanguard FTSE Developed Markets Index Fund ETF Shares (VEA) is a Foreign Large Blend fund that is issued by Vanguard. It currently has 157.48B total assets under management and has yielded an average annual return of 7.05% over the past 10 years. The fund has a dividend yield of 2.49% 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%.
VEA’s dividend yield is 0.99% higher than that of TLT (2.49% vs. 1.5%). Also, VEA yielded on average 1.95% less per year over the past decade (7.05% vs. 9.00%). The expense ratio of VEA is 0.10 percentage points lower than TLT’s (0.05% vs. 0.15%).
Fund Composition
Holdings
| VEA Holdings | Weight |
| Nestle SA | 1.5% |
| Samsung Electronics Co Ltd | 1.4% |
| ASML Holding NV | 1.16% |
| Roche Holding AG | 1.1% |
| Toyota Motor Corp | 0.92% |
| LVMH Moet Hennessy Louis Vuitton SE | 0.84% |
| Novartis AG | 0.82% |
| Shopify Inc A | 0.7% |
| AstraZeneca PLC | 0.67% |
| SAP SE | 0.66% |
VEA’s Top Holdings are Nestle SA, Samsung Electronics Co Ltd, ASML Holding NV, Roche Holding AG, and Toyota Motor Corp at 1.5%, 1.4%, 1.16%, 1.1%, and 0.92%.
LVMH Moet Hennessy Louis Vuitton SE (0.84%), Novartis AG (0.82%), and Shopify Inc A (0.7%) have a slightly smaller but still significant weight. AstraZeneca PLC and SAP SE are also represented in the VEA’s holdings at 0.67% and 0.66%.
| TLT Bond Sectors | Weight |
| AAA | 100.0% |
| Others | 0.0% |
| Below B | 0.0% |
| B | 0.0% |
| BB | 0.0% |
| BBB | 0.0% |
| A | 0.0% |
| AA | 0.0% |
| US Government | 0.0% |
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.
Performance
Annual Returns
| Year | VEA | TLT |
| 2020 | 10.29% | 17.92% |
| 2019 | 22.08% | 14.93% |
| 2018 | -14.47% | -2.07% |
| 2017 | 26.44% | 8.92% |
| 2016 | 2.51% | 1.36% |
| 2015 | -0.21% | -1.65% |
| 2014 | -5.71% | 27.35% |
| 2013 | 22.12% | -13.91% |
| 2012 | 18.6% | 3.25% |
| 2011 | -12.57% | 33.6% |
| 2010 | 8.47% | 9.25% |
VEA had its best year in 2017 with an annual return of 26.44%. VEA’s worst year over the past decade yielded -14.47% and occurred in 2018. In most years the Vanguard FTSE Developed Markets Index Fund ETF Shares provided moderate returns such as in 2016, 2010, and 2020 where annual returns amounted to 2.51%, 8.47%, and 10.29% 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.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| VEA | $10,000 | $19,290 | 7.05% |
| TLT | $10,000 | $23,809 | 9.00% |
A $10,000 investment in VEA would have resulted in a final balance of $19,290. This is a profit of $9,290 over 11 years and amounts to a compound annual growth rate (CAGR) of 7.05%.
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%.
VEA’s CAGR is 1.95 percentage points lower than that of TLT and as a result, would have yielded $4,519 less on a $10,000 investment. Thus, VEA performed worse than TLT by 1.95% annually.
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