VGT vs. GOVT: What’s The Difference?

The Vanguard Information Technology Index Fund ETF Shares (VGT) and the iShares U.S. Treasury Bond ETF (GOVT) are both among the Top 100 ETFs. VGT is a Vanguard Technology fund and GOVT is a iShares Intermediate Government fund. So, what’s the difference between VGT and GOVT? And which fund is better?

The expense ratio of VGT is 0.05 percentage points higher than GOVT’s (0.1% vs. 0.05%). VGT also has a high exposure to the technology sector while GOVT is mostly comprised of AAA bonds. Overall, VGT has provided higher returns than GOVT over the past ten years.

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

Summary

VGT GOVT
Name Vanguard Information Technology Index Fund ETF Shares iShares U.S. Treasury Bond ETF
Category Technology Intermediate Government
Issuer Vanguard iShares
AUM 54.13B 17.07B
Avg. Return 20.84% 2.67%
Div. Yield 0.66% 1.0%
Expense Ratio 0.1% 0.05%

The Vanguard Information Technology Index Fund ETF Shares (VGT) is a Technology fund that is issued by Vanguard. It currently has 54.13B total assets under management and has yielded an average annual return of 20.84% over the past 10 years. The fund has a dividend yield of 0.66% with an expense ratio of 0.1%.

The iShares U.S. Treasury Bond ETF (GOVT) is a Intermediate Government fund that is issued by iShares. It currently has 17.07B total assets under management and has yielded an average annual return of 2.67% over the past 10 years. The fund has a dividend yield of 1.0% with an expense ratio of 0.05%.

VGT’s dividend yield is 0.34% lower than that of GOVT (0.66% vs. 1.0%). Also, VGT yielded on average 18.16% more per year over the past decade (20.84% vs. 2.67%). The expense ratio of VGT is 0.05 percentage points higher than GOVT’s (0.1% vs. 0.05%).

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Fund Composition

Holdings

VGT - Holdings

VGT Holdings Weight
Apple Inc 19.58%
Microsoft Corp 16.53%
NVIDIA Corp 4.22%
Visa Inc Class A 3.16%
PayPal Holdings Inc 2.76%
Mastercard Inc Class A 2.76%
Adobe Inc 2.39%
Intel Corp 1.94%
Salesforce.com Inc 1.91%
Cisco Systems Inc 1.9%

VGT’s Top Holdings are Apple Inc, Microsoft Corp, NVIDIA Corp, Visa Inc Class A, and PayPal Holdings Inc at 19.58%, 16.53%, 4.22%, 3.16%, and 2.76%.

Mastercard Inc Class A (2.76%), Adobe Inc (2.39%), and Intel Corp (1.94%) have a slightly smaller but still significant weight. Salesforce.com Inc and Cisco Systems Inc are also represented in the VGT’s holdings at 1.91% and 1.9%.

GOVT - Holdings

GOVT 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%

GOVT’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

VGT GOVT
Mean Return 1.76 0
R-squared 74.84 0
Std. Deviation 16.61 0
Alpha 10.41 0
Beta 1.02 0
Sharpe Ratio 1.23 0
Treynor Ratio 20.55 0

The Vanguard Information Technology Index Fund ETF Shares (VGT) has a Treynor Ratio of 20.55 with a Beta of 1.02 and a R-squared of 74.84. Its Mean Return is 1.76 while VGT’s Sharpe Ratio is 1.23. Furthermore, the fund has a Alpha of 10.41 and a Standard Deviation of 16.61.

The iShares U.S. Treasury Bond ETF (GOVT) has a Treynor Ratio of 0 with a Alpha of 0 and a Mean Return of 0. Its Standard Deviation is 0 while GOVT’s Beta is 0. Furthermore, the fund has a Sharpe Ratio of 0 and a R-squared of 0.

VGT’s Mean Return is 1.76 points higher than that of GOVT and its R-squared is 74.84 points higher. With a Standard Deviation of 16.61, VGT is slightly more volatile than GOVT. The Alpha and Beta of VGT are 10.41 points higher and 1.02 points higher than GOVT’s Alpha and Beta.

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Performance

Annual Returns

VGT vs. GOVT - Annual Returns

Year VGT GOVT
2020 45.94% 7.92%
2019 48.68% 6.71%
2018 2.52% 0.74%
2017 37.07% 2.19%
2016 13.73% 0.92%
2015 5.02% 0.76%
2014 18.01% 4.99%
2013 30.91% -2.84%
2012 14.05% 0.0%
2011 0.52% 0.0%
2010 12.74% 0.0%

VGT had its best year in 2019 with an annual return of 48.68%. VGT’s worst year over the past decade yielded 0.52% and occurred in 2011. In most years the Vanguard Information Technology Index Fund ETF Shares provided moderate returns such as in 2016, 2012, and 2014 where annual returns amounted to 13.73%, 14.05%, and 18.01% respectively.

The year 2020 was the strongest year for GOVT, returning 7.92% on an annual basis. The poorest year for GOVT in the last ten years was 2013, with a yield of -2.84%. Most years the iShares U.S. Treasury Bond ETF has given investors modest returns, such as in 2018, 2015, and 2016, when gains were 0.74%, 0.76%, and 0.92% respectively.

Portfolio Growth

VGT vs. GOVT - Portfolio Growth

Fund Initial Balance Final Balance CAGR
VGT $10,000 $56,262 20.84%
GOVT $10,000 $12,297 2.67%

A $10,000 investment in VGT would have resulted in a final balance of $56,262. This is a profit of $46,262 over 8 years and amounts to a compound annual growth rate (CAGR) of 20.84%.

With a $10,000 investment in GOVT, the end total would have been $12,297. This equates to a $2,297 profit over 8 years and a compound annual growth rate (CAGR) of 2.67%.

VGT’s CAGR is 18.16 percentage points higher than that of GOVT and as a result, would have yielded $43,965 more on a $10,000 investment. Thus, VGT outperformed GOVT by 18.16% annually.


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