The Vanguard Information Technology Index Fund ETF Shares (VGT) and the iShares 7-10 Year Treasury Bond ETF (IEF) are both among the Top 100 ETFs. VGT is a Vanguard Technology fund and IEF is a iShares Long Government fund. So, what’s the difference between VGT and IEF? And which fund is better?
The expense ratio of VGT is 0.05 percentage points lower than IEF’s (0.1% vs. 0.15%). VGT also has a high exposure to the technology sector while IEF is mostly comprised of AAA bonds. Overall, VGT has provided higher returns than IEF over the past ten years.
In this article, we’ll compare VGT vs. IEF. We’ll look at portfolio growth and industry exposure, as well as at their risk metrics and holdings. Moreover, I’ll also discuss VGT’s and IEF’s performance, annual returns, and fund composition and examine how these affect their overall returns.
|Name||Vanguard Information Technology Index Fund ETF Shares||iShares 7-10 Year Treasury Bond ETF|
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 7-10 Year Treasury Bond ETF (IEF) is a Long Government fund that is issued by iShares. It currently has 13.44B total assets under management and has yielded an average annual return of 5.06% over the past 10 years. The fund has a dividend yield of 0.84% with an expense ratio of 0.15%.
VGT’s dividend yield is 0.18% lower than that of IEF (0.66% vs. 0.84%). Also, VGT yielded on average 15.77% more per year over the past decade (20.84% vs. 5.06%). The expense ratio of VGT is 0.05 percentage points lower than IEF’s (0.1% vs. 0.15%).
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|Visa Inc Class A||3.16%|
|PayPal Holdings Inc||2.76%|
|Mastercard Inc Class A||2.76%|
|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%.
|IEF Bond Sectors||Weight|
IEF’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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The Vanguard Information Technology Index Fund ETF Shares (VGT) has a Treynor Ratio of 20.55 with a Alpha of 10.41 and a Sharpe Ratio of 1.23. Its Beta is 1.02 while VGT’s R-squared is 74.84. Furthermore, the fund has a Standard Deviation of 16.61 and a Mean Return of 1.76.
The iShares 7-10 Year Treasury Bond ETF (IEF) has a Beta of 1.59 with a Treynor Ratio of 1.97 and a Mean Return of 0.32. Its Standard Deviation is 5.42 while IEF’s Sharpe Ratio is 0.6. Furthermore, the fund has a R-squared of 77.56 and a Alpha of -1.2.
VGT’s Mean Return is 1.44 points higher than that of IEF and its R-squared is 2.72 points lower. With a Standard Deviation of 16.61, VGT is slightly more volatile than IEF. The Alpha and Beta of VGT are 11.61 points higher and 0.57 points lower than IEF’s Alpha and Beta.
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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 2011 was the strongest year for IEF, returning 15.46% on an annual basis. The poorest year for IEF in the last ten years was 2013, with a yield of -6.12%. Most years the iShares 7-10 Year Treasury Bond ETF has given investors modest returns, such as in 2017, 2012, and 2019, when gains were 2.47%, 4.06%, and 8.38% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in VGT would have resulted in a final balance of $72,718. This is a profit of $62,718 over 11 years and amounts to a compound annual growth rate (CAGR) of 20.84%.
With a $10,000 investment in IEF, the end total would have been $16,936. This equates to a $6,936 profit over 11 years and a compound annual growth rate (CAGR) of 5.06%.
VGT’s CAGR is 15.77 percentage points higher than that of IEF and as a result, would have yielded $55,782 more on a $10,000 investment. Thus, VGT outperformed IEF by 15.77% annually.
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