VHT vs. BIV: What’s The Difference?

The Vanguard Health Care Index Fund ETF Shares (VHT) and the Vanguard Intermediate-Term Bond Index Fund ETF Shares (BIV) are both among the Top 100 ETFs. VHT is a Vanguard Health fund and BIV is a Vanguard Intermediate-Term Bond fund. So, what’s the difference between VHT and BIV? And which fund is better?

The expense ratio of VHT is 0.05 percentage points higher than BIV’s (0.1% vs. 0.05%). VHT also has a high exposure to the healthcare sector while BIV is mostly comprised of AAA bonds. Overall, VHT has provided higher returns than BIV over the past 11 years.

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

Summary

VHT BIV
Name Vanguard Health Care Index Fund ETF Shares Vanguard Intermediate-Term Bond Index Fund ETF Shares
Category Health Intermediate-Term Bond
Issuer Vanguard Vanguard
AUM 17.94B 39.05B
Avg. Return 16.04% 5.31%
Div. Yield 1.15% 2.06%
Expense Ratio 0.1% 0.05%

The Vanguard Health Care Index Fund ETF Shares (VHT) is a Health fund that is issued by Vanguard. It currently has 17.94B total assets under management and has yielded an average annual return of 16.04% over the past 10 years. The fund has a dividend yield of 1.15% with an expense ratio of 0.1%.

The Vanguard Intermediate-Term Bond Index Fund ETF Shares (BIV) is a Intermediate-Term Bond fund that is issued by Vanguard. It currently has 39.05B total assets under management and has yielded an average annual return of 5.31% over the past 10 years. The fund has a dividend yield of 2.06% with an expense ratio of 0.05%.

VHT’s dividend yield is 0.91% lower than that of BIV (1.15% vs. 2.06%). Also, VHT yielded on average 10.73% more per year over the past decade (16.04% vs. 5.31%). The expense ratio of VHT is 0.05 percentage points higher than BIV’s (0.1% vs. 0.05%).

Fund Composition

Holdings

VHT - Holdings

VHT Holdings Weight
Johnson & Johnson 7.34%
UnitedHealth Group Inc 6.44%
Pfizer Inc 3.7%
Abbott Laboratories 3.48%
Thermo Fisher Scientific Inc 3.37%
AbbVie Inc 3.37%
Merck & Co Inc 3.33%
Eli Lilly and Co 3.17%
Danaher Corp 2.91%
Medtronic PLC 2.83%

VHT’s Top Holdings are Johnson & Johnson, UnitedHealth Group Inc, Pfizer Inc, Abbott Laboratories, and Thermo Fisher Scientific Inc at 7.34%, 6.44%, 3.7%, 3.48%, and 3.37%.

AbbVie Inc (3.37%), Merck & Co Inc (3.33%), and Eli Lilly and Co (3.17%) have a slightly smaller but still significant weight. Danaher Corp and Medtronic PLC are also represented in the VHT’s holdings at 2.91% and 2.83%.

BIV - Holdings

BIV Bond Sectors Weight
AAA 54.51%
BBB 25.24%
A 16.97%
AA 3.1%
Others 0.15%
Below B 0.03%
B 0.0%
BB 0.0%
US Government 0.0%

BIV’s Top Bond Sectors are ratings of AAA, BBB, A, AA, and Others at 54.51%, 25.24%, 16.97%, 3.1%, and 0.15%. The fund is less weighted towards Below B (0.03%), B (0.0%), and BB (0.0%) rated bonds.

Risk Analysis

VHT BIV
Mean Return 1.33 0.35
R-squared 59.86 95.12
Std. Deviation 13.58 4.09
Alpha 7.99 -0.07
Beta 0.75 1.33
Sharpe Ratio 1.13 0.89
Treynor Ratio 20.74 2.72

The Vanguard Health Care Index Fund ETF Shares (VHT) has a Mean Return of 1.33 with a Treynor Ratio of 20.74 and a Standard Deviation of 13.58. Its Beta is 0.75 while VHT’s R-squared is 59.86. Furthermore, the fund has a Alpha of 7.99 and a Sharpe Ratio of 1.13.

The Vanguard Intermediate-Term Bond Index Fund ETF Shares (BIV) has a Sharpe Ratio of 0.89 with a Standard Deviation of 4.09 and a Mean Return of 0.35. Its Treynor Ratio is 2.72 while BIV’s R-squared is 95.12. Furthermore, the fund has a Alpha of -0.07 and a Beta of 1.33.

VHT’s Mean Return is 0.98 points higher than that of BIV and its R-squared is 35.26 points lower. With a Standard Deviation of 13.58, VHT is slightly more volatile than BIV. The Alpha and Beta of VHT are 8.06 points higher and 0.58 points lower than BIV’s Alpha and Beta.

Performance

Annual Returns

VHT vs. BIV - Annual Returns

Year VHT BIV
2020 18.21% 9.71%
2019 21.97% 10.19%
2018 5.55% -0.09%
2017 23.34% 3.8%
2016 -3.33% 2.86%
2015 7.22% 1.23%
2014 25.38% 7.0%
2013 42.67% -3.44%
2012 19.1% 7.02%
2011 10.57% 10.62%
2010 5.75% 9.55%

VHT had its best year in 2013 with an annual return of 42.67%. VHT’s worst year over the past decade yielded -3.33% and occurred in 2016. In most years the Vanguard Health Care Index Fund ETF Shares provided moderate returns such as in 2011, 2020, and 2012 where annual returns amounted to 10.57%, 18.21%, and 19.1% respectively.

The year 2011 was the strongest year for BIV, returning 10.62% on an annual basis. The poorest year for BIV in the last ten years was 2013, with a yield of -3.44%. Most years the Vanguard Intermediate-Term Bond Index Fund ETF Shares has given investors modest returns, such as in 2017, 2014, and 2012, when gains were 3.8%, 7.0%, and 7.02% respectively.

Portfolio Growth

VHT vs. BIV - Portfolio Growth

Fund Initial Balance Final Balance CAGR
VHT $10,000 $48,464 16.04%
BIV $10,000 $17,492 5.31%

A $10,000 investment in VHT would have resulted in a final balance of $48,464. This is a profit of $38,464 over 11 years and amounts to a compound annual growth rate (CAGR) of 16.04%.

With a $10,000 investment in BIV, the end total would have been $17,492. This equates to a $7,492 profit over 11 years and a compound annual growth rate (CAGR) of 5.31%.

VHT’s CAGR is 10.73 percentage points higher than that of BIV and as a result, would have yielded $30,972 more on a $10,000 investment. Thus, VHT outperformed BIV by 10.73% annually.


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