The Vanguard FTSE All-World ex-US Index Fund ETF Shares (VEU) and the Vanguard Mortgage-Backed Securities Index Fund ETF Shares (VMBS) are both among the Top 100 ETFs. VEU is a Vanguard Foreign Large Blend fund and VMBS is a Vanguard Intermediate Government fund. So, what’s the difference between VEU and VMBS? And which fund is better?
The expense ratio of VEU is 0.03 percentage points higher than VMBS’s (0.08% vs. 0.05%). VEU also has a high exposure to the financial services sector while VMBS is mostly comprised of AAA bonds. Overall, VEU has provided higher returns than VMBS over the past ten years.
In this article, we’ll compare VEU vs. VMBS. We’ll look at fund composition and portfolio growth, as well as at their holdings and risk metrics. Moreover, I’ll also discuss VEU’s and VMBS’s performance, annual returns, and industry exposure and examine how these affect their overall returns.
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|Name||Vanguard FTSE All-World ex-US Index Fund ETF Shares||Vanguard Mortgage-Backed Securities Index Fund ETF Shares|
|Category||Foreign Large Blend||Intermediate Government|
The Vanguard FTSE All-World ex-US Index Fund ETF Shares (VEU) is a Foreign Large Blend fund that is issued by Vanguard. It currently has 53.64B total assets under management and has yielded an average annual return of 6.64% over the past 10 years. The fund has a dividend yield of 2.31% with an expense ratio of 0.08%.
The Vanguard Mortgage-Backed Securities Index Fund ETF Shares (VMBS) is a Intermediate Government fund that is issued by Vanguard. It currently has 16.61B total assets under management and has yielded an average annual return of 2.89% over the past 10 years. The fund has a dividend yield of 1.23% with an expense ratio of 0.05%.
VEU’s dividend yield is 1.08% higher than that of VMBS (2.31% vs. 1.23%). Also, VEU yielded on average 3.75% more per year over the past decade (6.64% vs. 2.89%). The expense ratio of VEU is 0.03 percentage points higher than VMBS’s (0.08% vs. 0.05%).
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|Tencent Holdings Ltd||1.57%|
|Alibaba Group Holding Ltd Ordinary Shares||1.4%|
|Taiwan Semiconductor Manufacturing Co Ltd||0.98%|
|ASML Holding NV||0.95%|
|Taiwan Semiconductor Manufacturing Co Ltd ADR||0.91%|
|Roche Holding AG||0.91%|
|Toyota Motor Corp||0.75%|
|LVMH Moet Hennessy Louis Vuitton SE||0.68%|
VEU’s Top Holdings are Tencent Holdings Ltd, Alibaba Group Holding Ltd Ordinary Shares, Nestle SA, Taiwan Semiconductor Manufacturing Co Ltd, and ASML Holding NV at 1.57%, 1.4%, 1.22%, 0.98%, and 0.95%.
Taiwan Semiconductor Manufacturing Co Ltd ADR (0.91%), Roche Holding AG (0.91%), and Toyota Motor Corp (0.75%) have a slightly smaller but still significant weight. LVMH Moet Hennessy Louis Vuitton SE and Novartis AG are also represented in the VEU’s holdings at 0.68% and 0.67%.
|VMBS Bond Sectors||Weight|
VMBS’s Top Bond Sectors are ratings of AAA, Below B, B, BB, and BBB at 100.01%, 0.0%, 0.0%, 0.0%, and 0.0%. The fund is less weighted towards A (0.0%), AA (0.0%), and US Government (0.0%) rated bonds.
The Vanguard FTSE All-World ex-US Index Fund ETF Shares (VEU) has a Treynor Ratio of 5.12 with a R-squared of 98.44 and a Mean Return of 0.56. Its Standard Deviation is 15.08 while VEU’s Alpha is 0.28. Furthermore, the fund has a Sharpe Ratio of 0.4 and a Beta of 0.99.
The Vanguard Mortgage-Backed Securities Index Fund ETF Shares (VMBS) has a Sharpe Ratio of 0.94 with a Mean Return of 0.21 and a Treynor Ratio of 3.47. Its R-squared is 65.78 while VMBS’s Standard Deviation is 2.02. Furthermore, the fund has a Beta of 0.54 and a Alpha of 0.37.
VEU’s Mean Return is 0.35 points higher than that of VMBS and its R-squared is 32.66 points higher. With a Standard Deviation of 15.08, VEU is slightly more volatile than VMBS. The Alpha and Beta of VEU are 0.09 points lower and 0.45 points higher than VMBS’s Alpha and Beta.
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VEU had its best year in 2017 with an annual return of 27.27%. VEU’s worst year over the past decade yielded -14.25% and occurred in 2011. In most years the Vanguard FTSE All-World ex-US Index Fund ETF Shares provided moderate returns such as in 2016, 2020, and 2010 where annual returns amounted to 4.77%, 11.39%, and 11.85% respectively.
The year 2019 was the strongest year for VMBS, returning 6.17% on an annual basis. The poorest year for VMBS in the last ten years was 2013, with a yield of -1.28%. Most years the Vanguard Mortgage-Backed Securities Index Fund ETF Shares has given investors modest returns, such as in 2017, 2012, and 2020, when gains were 2.37%, 2.47%, and 3.77% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in VEU would have resulted in a final balance of $16,546. This is a profit of $6,546 over 10 years and amounts to a compound annual growth rate (CAGR) of 6.64%.
With a $10,000 investment in VMBS, the end total would have been $13,265. This equates to a $3,265 profit over 10 years and a compound annual growth rate (CAGR) of 2.89%.
VEU’s CAGR is 3.75 percentage points higher than that of VMBS and as a result, would have yielded $3,281 more on a $10,000 investment. Thus, VEU outperformed VMBS by 3.75% annually.
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