The Vanguard Information Technology Index Fund ETF Shares (VGT) and the iShares 20+ Year Treasury Bond ETF (TLT) are both among the Top 100 ETFs. VGT is a Vanguard Technology fund and TLT is a iShares Long Government fund. So, what’s the difference between VGT and TLT? And which fund is better?
The expense ratio of VGT is 0.05 percentage points lower than TLT’s (0.1% vs. 0.15%). VGT also has a high exposure to the technology sector while TLT is mostly comprised of AAA bonds. Overall, VGT has provided higher returns than TLT over the past ten years.
In this article, we’ll compare VGT vs. TLT. We’ll look at portfolio growth and risk metrics, as well as at their annual returns and performance. Moreover, I’ll also discuss VGT’s and TLT’s industry exposure, fund composition, and holdings and examine how these affect their overall returns.
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Summary
| VGT | TLT | |
| NameVanguard Information Technology Index Fund ETF SharesiShares 20+ Year Treasury Bond ETF | ||
| Category | Technology | Long Government |
| Issuer | Vanguard | iShares |
| AUM | 54.13B | 15.15B |
| Avg. Return | 20.84% | 9.00% |
| Div. Yield | 0.66% | 1.5% |
| Expense Ratio | 0.1% | 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 20+ Year Treasury Bond ETF (TLT) is a Long Government fund that is issued by iShares. It currently has 15.15B total assets under management and has yielded an average annual return of 9.00% over the past 10 years. The fund has a dividend yield of 1.5% with an expense ratio of 0.15%.
VGT’s dividend yield is 0.84% lower than that of TLT (0.66% vs. 1.5%). Also, VGT yielded on average 11.84% more per year over the past decade (20.84% vs. 9.00%). The expense ratio of VGT is 0.05 percentage points lower than TLT’s (0.1% vs. 0.15%).
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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%.
| TLT 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% |
TLT’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.
Risk Analysis
| VGT | TLT | |
| Mean Return | 1.76 | 0.63 |
| R-squared | 74.84 | 68.76 |
| Std. Deviation | 16.61 | 12.76 |
| Alpha | 10.41 | -2.83 |
| Beta | 1.02 | 3.54 |
| Sharpe Ratio | 1.23 | 0.55 |
| Treynor Ratio | 20.55 | 1.82 |
The Vanguard Information Technology Index Fund ETF Shares (VGT) has a Mean Return of 1.76 with a R-squared of 74.84 and a Sharpe Ratio of 1.23. Its Alpha is 10.41 while VGT’s Standard Deviation is 16.61. Furthermore, the fund has a Beta of 1.02 and a Treynor Ratio of 20.55.
The iShares 20+ Year Treasury Bond ETF (TLT) has a Treynor Ratio of 1.82 with a Mean Return of 0.63 and a R-squared of 68.76. Its Standard Deviation is 12.76 while TLT’s Sharpe Ratio is 0.55. Furthermore, the fund has a Alpha of -2.83 and a Beta of 3.54.
VGT’s Mean Return is 1.13 points higher than that of TLT and its R-squared is 6.08 points higher. With a Standard Deviation of 16.61, VGT is slightly more volatile than TLT. The Alpha and Beta of VGT are 13.24 points higher and 2.52 points lower than TLT’s Alpha and Beta.
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Performance
Annual Returns
| Year | VGT | TLT |
| 2020 | 45.94% | 17.92% |
| 2019 | 48.68% | 14.93% |
| 2018 | 2.52% | -2.07% |
| 2017 | 37.07% | 8.92% |
| 2016 | 13.73% | 1.36% |
| 2015 | 5.02% | -1.65% |
| 2014 | 18.01% | 27.35% |
| 2013 | 30.91% | -13.91% |
| 2012 | 14.05% | 3.25% |
| 2011 | 0.52% | 33.6% |
| 2010 | 12.74% | 9.25% |
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 TLT, returning 33.6% on an annual basis. The poorest year for TLT in the last ten years was 2013, with a yield of -13.91%. Most years the iShares 20+ Year Treasury Bond ETF has given investors modest returns, such as in 2012, 2017, and 2010, when gains were 3.25%, 8.92%, and 9.25% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| VGT | $10,000 | $72,718 | 20.84% |
| TLT | $10,000 | $23,809 | 9.00% |
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 TLT, the end total would have been $23,809. This equates to a $13,809 profit over 11 years and a compound annual growth rate (CAGR) of 9.00%.
VGT’s CAGR is 11.84 percentage points higher than that of TLT and as a result, would have yielded $48,909 more on a $10,000 investment. Thus, VGT outperformed TLT by 11.84% annually.
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