The Vanguard Information Technology Index Fund ETF Shares (VGT) and the iShares MBS ETF (MBB) are both among the Top 100 ETFs. VGT is a Vanguard Technology fund and MBB is a iShares Intermediate Government fund. So, what’s the difference between VGT and MBB? And which fund is better?
The expense ratio of VGT is 0.04 percentage points higher than MBB’s (0.1% vs. 0.06%). VGT also has a high exposure to the technology sector while MBB is mostly comprised of AAA bonds. Overall, VGT has provided higher returns than MBB over the past ten years.
In this article, we’ll compare VGT vs. MBB. We’ll look at performance and risk metrics, as well as at their annual returns and portfolio growth. Moreover, I’ll also discuss VGT’s and MBB’s holdings, industry exposure, and fund composition and examine how these affect their overall returns.
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Summary
| VGT | MBB | |
| Name | Vanguard Information Technology Index Fund ETF Shares | iShares MBS ETF |
| Category | Technology | Intermediate Government |
| Issuer | Vanguard | iShares |
| AUM | 54.13B | 25.69B |
| Avg. Return | 20.84% | 3.08% |
| Div. Yield | 0.66% | 1.88% |
| Expense Ratio | 0.1% | 0.06% |
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 MBS ETF (MBB) is a Intermediate Government fund that is issued by iShares. It currently has 25.69B total assets under management and has yielded an average annual return of 3.08% over the past 10 years. The fund has a dividend yield of 1.88% with an expense ratio of 0.06%.
VGT’s dividend yield is 1.22% lower than that of MBB (0.66% vs. 1.88%). Also, VGT yielded on average 17.76% more per year over the past decade (20.84% vs. 3.08%). The expense ratio of VGT is 0.04 percentage points higher than MBB’s (0.1% vs. 0.06%).
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Fund Composition
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%.
| MBB Bond Sectors | Weight |
| AAA | 99.51% |
| Others | 0.49% |
| Below B | 0.0% |
| B | 0.0% |
| BB | 0.0% |
| BBB | 0.0% |
| A | 0.0% |
| AA | 0.0% |
| US Government | 0.0% |
MBB’s Top Bond Sectors are ratings of AAA, Others, Below B, B, and BB at 99.51%, 0.49%, 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.
Risk Analysis
| VGT | MBB | |
| Mean Return | 1.76 | 0.2 |
| R-squared | 74.84 | 74.38 |
| Std. Deviation | 16.61 | 2.12 |
| Alpha | 10.41 | 0.14 |
| Beta | 1.02 | 0.6 |
| Sharpe Ratio | 1.23 | 0.87 |
| Treynor Ratio | 20.55 | 3.02 |
The Vanguard Information Technology Index Fund ETF Shares (VGT) has a Treynor Ratio of 20.55 with a Beta of 1.02 and a Alpha of 10.41. Its Sharpe Ratio is 1.23 while VGT’s Mean Return is 1.76. Furthermore, the fund has a R-squared of 74.84 and a Standard Deviation of 16.61.
The iShares MBS ETF (MBB) has a Treynor Ratio of 3.02 with a Mean Return of 0.2 and a Beta of 0.6. Its Alpha is 0.14 while MBB’s R-squared is 74.38. Furthermore, the fund has a Sharpe Ratio of 0.87 and a Standard Deviation of 2.12.
VGT’s Mean Return is 1.56 points higher than that of MBB and its R-squared is 0.46 points higher. With a Standard Deviation of 16.61, VGT is slightly more volatile than MBB. The Alpha and Beta of VGT are 10.27 points higher and 0.42 points higher than MBB’s Alpha and Beta.
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Performance
Annual Returns
| Year | VGT | MBB |
| 2020 | 45.94% | 4.03% |
| 2019 | 48.68% | 6.27% |
| 2018 | 2.52% | 0.81% |
| 2017 | 37.07% | 2.37% |
| 2016 | 13.73% | 1.28% |
| 2015 | 5.02% | 1.28% |
| 2014 | 18.01% | 6.16% |
| 2013 | 30.91% | -1.92% |
| 2012 | 14.05% | 2.23% |
| 2011 | 0.52% | 5.88% |
| 2010 | 12.74% | 5.44% |
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 2019 was the strongest year for MBB, returning 6.27% on an annual basis. The poorest year for MBB in the last ten years was 2013, with a yield of -1.92%. Most years the iShares MBS ETF has given investors modest returns, such as in 2012, 2017, and 2020, when gains were 2.23%, 2.37%, and 4.03% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| VGT | $10,000 | $72,718 | 20.84% |
| MBB | $10,000 | $13,906 | 3.08% |
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 MBB, the end total would have been $13,906. This equates to a $3,906 profit over 11 years and a compound annual growth rate (CAGR) of 3.08%.
VGT’s CAGR is 17.76 percentage points higher than that of MBB and as a result, would have yielded $58,812 more on a $10,000 investment. Thus, VGT outperformed MBB by 17.76% annually.
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