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VGT vs. QUAL: What’s The Difference?

The Vanguard Information Technology Index Fund ETF Shares (VGT) and the iShares MSCI USA Quality Factor ETF (QUAL) are both among the Top 100 ETFs. VGT is a Vanguard Technology fund and QUAL is a iShares Large Blend fund. So, what’s the difference between VGT and QUAL? And which fund is better?

The expense ratio of VGT is 0.05 percentage points lower than QUAL’s (0.1% vs. 0.15%). VGT also has a higher exposure to the technology sector and a higher standard deviation. Overall, VGT has provided higher returns than QUAL over the past ten years.

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

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Summary

VGTQUAL
NameVanguard Information Technology Index Fund ETF SharesiShares MSCI USA Quality Factor ETF
CategoryTechnologyLarge Blend
IssuerVanguardiShares
AUM54.13B23.93B
Avg. Return20.84%13.42%
Div. Yield0.66%1.29%
Expense Ratio0.1%0.15%

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 MSCI USA Quality Factor ETF (QUAL) is a Large Blend fund that is issued by iShares. It currently has 23.93B total assets under management and has yielded an average annual return of 13.42% over the past 10 years. The fund has a dividend yield of 1.29% with an expense ratio of 0.15%.

VGT’s dividend yield is 0.63% lower than that of QUAL (0.66% vs. 1.29%). Also, VGT yielded on average 7.41% more per year over the past decade (20.84% vs. 13.42%). The expense ratio of VGT is 0.05 percentage points lower than QUAL’s (0.1% vs. 0.15%).

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Fund Composition

Industry Exposure

VGT vs. QUAL - Industry Exposure

VGTQUAL
Technology88.89%22.52%
Industrials1.67%9.22%
Energy0.0%2.24%
Communication Services0.61%11.44%
Utilities0.0%2.41%
Healthcare0.0%13.22%
Consumer Defensive0.0%8.57%
Real Estate0.0%2.72%
Financial Services8.83%15.87%
Consumer Cyclical0.0%9.43%
Basic Materials0.0%2.35%

The Vanguard Information Technology Index Fund ETF Shares (VGT) has the most exposure to the Technology sector at 88.89%. This is followed by Financial Services and Industrials at 8.83% and 1.67% respectively. Consumer Cyclical (0.0%), Real Estate (0.0%), and Consumer Defensive (0.0%) only make up 0.00% of the fund’s total assets.

VGT’s mid-section with moderate exposure is comprised of Healthcare, Utilities, Energy, Communication Services, and Industrials stocks at 0.0%, 0.0%, 0.0%, 0.61%, and 1.67%.

The iShares MSCI USA Quality Factor ETF (QUAL) has the most exposure to the Technology sector at 22.52%. This is followed by Financial Services and Healthcare at 15.87% and 13.22% respectively. Basic Materials (2.35%), Utilities (2.41%), and Real Estate (2.72%) only make up 7.48% of the fund’s total assets.

QUAL’s mid-section with moderate exposure is comprised of Consumer Defensive, Industrials, Consumer Cyclical, Communication Services, and Healthcare stocks at 8.57%, 9.22%, 9.43%, 11.44%, and 13.22%.

VGT is 66.37% more exposed to the Technology sector than QUAL (88.89% vs 22.52%). VGT’s exposure to Financial Services and Industrials stocks is 7.04% lower and 7.55% lower respectively (8.83% vs. 15.87% and 1.67% vs. 9.22%). In total, Consumer Cyclical, Real Estate, and Consumer Defensive also make up 20.72% less of the fund’s holdings compared to QUAL (0.00% vs. 20.72%).

Holdings

VGT - Holdings

VGT HoldingsWeight
Apple Inc19.58%
Microsoft Corp16.53%
NVIDIA Corp4.22%
Visa Inc Class A3.16%
PayPal Holdings Inc2.76%
Mastercard Inc Class A2.76%
Adobe Inc2.39%
Intel Corp1.94%
Salesforce.com Inc1.91%
Cisco Systems Inc1.9%

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%.

QUAL - Holdings

QUAL HoldingsWeight
Facebook Inc Class A4.77%
Nike Inc Class B4.05%
Microsoft Corp3.54%
Apple Inc3.52%
Johnson & Johnson2.99%
BlackRock Inc2.87%
Target Corp2.8%
Mastercard Inc Class A2.72%
NVIDIA Corp2.71%
Alphabet Inc Class A2.49%

QUAL’s Top Holdings are Facebook Inc Class A, Nike Inc Class B, Microsoft Corp, Apple Inc, and Johnson & Johnson at 4.77%, 4.05%, 3.54%, 3.52%, and 2.99%.

BlackRock Inc (2.87%), Target Corp (2.8%), and Mastercard Inc Class A (2.72%) have a slightly smaller but still significant weight. NVIDIA Corp and Alphabet Inc Class A are also represented in the QUAL’s holdings at 2.71% and 2.49%.

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Risk Analysis

VGTQUAL
Mean Return1.760
R-squared74.840
Std. Deviation16.610
Alpha10.410
Beta1.020
Sharpe Ratio1.230
Treynor Ratio20.550

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

The iShares MSCI USA Quality Factor ETF (QUAL) has a Mean Return of 0 with a Standard Deviation of 0 and a R-squared of 0. Its Alpha is 0 while QUAL’s Treynor Ratio is 0. Furthermore, the fund has a Sharpe Ratio of 0 and a Beta of 0.

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

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Performance

Annual Returns

VGT vs. QUAL - Annual Returns

YearVGTQUAL
202045.94%16.96%
201948.68%34.14%
20182.52%-5.77%
201737.07%22.26%
201613.73%9.18%
20155.02%5.56%
201418.01%11.62%
201330.91%0.0%
201214.05%0.0%
20110.52%0.0%
201012.74%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 2019 was the strongest year for QUAL, returning 34.14% on an annual basis. The poorest year for QUAL in the last ten years was 2018, with a yield of -5.77%. Most years the iShares MSCI USA Quality Factor ETF has given investors modest returns, such as in 2010, 2015, and 2016, when gains were 0.0%, 5.56%, and 9.18% respectively.

Portfolio Growth

VGT vs. QUAL - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
VGT$10,000$42,97720.84%
QUAL$10,000$23,25113.42%

A $10,000 investment in VGT would have resulted in a final balance of $42,977. This is a profit of $32,977 over 7 years and amounts to a compound annual growth rate (CAGR) of 20.84%.

With a $10,000 investment in QUAL, the end total would have been $23,251. This equates to a $13,251 profit over 7 years and a compound annual growth rate (CAGR) of 13.42%.

VGT’s CAGR is 7.41 percentage points higher than that of QUAL and as a result, would have yielded $19,726 more on a $10,000 investment. Thus, VGT outperformed QUAL by 7.41% annually.


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