The Vanguard Health Care Index Fund ETF Shares (VHT) and the Dimensional U.S. Core Equity 2 ETF (DFAC) are both among the Top 100 ETFs. VHT is a Vanguard Health fund and DFAC is a Dimensional Fund Advisors Large Blend fund. So, what’s the difference between VHT and DFAC? And which fund is better?
The expense ratio of VHT is 0.09 percentage points lower than DFAC’s (0.1% vs. 0.19%). VHT also has a higher exposure to the healthcare sector and a lower standard deviation. Overall, VHT has provided higher returns than DFAC over the past 11 years.
In this article, we’ll compare VHT vs. DFAC. We’ll look at fund composition and portfolio growth, as well as at their annual returns and performance. Moreover, I’ll also discuss VHT’s and DFAC’s industry exposure, holdings, and risk metrics and examine how these affect their overall returns.
Summary
| VHT | DFAC | |
| Name | Vanguard Health Care Index Fund ETF Shares | Dimensional U.S. Core Equity 2 ETF |
| Category | Health | Large Blend |
| Issuer | Vanguard | Dimensional Fund Advisors |
| AUM | 17.94B | 13.53B |
| Avg. Return | 16.04% | 13.93% |
| Div. Yield | 1.15% | 1.0% |
| Expense Ratio | 0.1% | 0.19% |
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 Dimensional U.S. Core Equity 2 ETF (DFAC) is a Large Blend fund that is issued by Dimensional Fund Advisors. It currently has 13.53B total assets under management and has yielded an average annual return of 13.93% over the past 10 years. The fund has a dividend yield of 1.0% with an expense ratio of 0.19%.
VHT’s dividend yield is 0.15% higher than that of DFAC (1.15% vs. 1.0%). Also, VHT yielded on average 2.11% more per year over the past decade (16.04% vs. 13.93%). The expense ratio of VHT is 0.09 percentage points lower than DFAC’s (0.1% vs. 0.19%).
Fund Composition
Industry Exposure
| VHT | DFAC | |
| Technology | 0.05% | 22.81% |
| Industrials | 0.05% | 14.13% |
| Energy | 0.0% | 2.67% |
| Communication Services | 0.0% | 7.63% |
| Utilities | 0.0% | 1.54% |
| Healthcare | 99.57% | 12.09% |
| Consumer Defensive | 0.0% | 5.94% |
| Real Estate | 0.0% | 0.37% |
| Financial Services | 0.02% | 16.17% |
| Consumer Cyclical | 0.0% | 13.09% |
| Basic Materials | 0.31% | 3.56% |
The Vanguard Health Care Index Fund ETF Shares (VHT) has the most exposure to the Healthcare sector at 99.57%. This is followed by Basic Materials and Technology at 0.31% and 0.05% respectively. Real Estate (0.0%), Consumer Defensive (0.0%), and Utilities (0.0%) only make up 0.00% of the fund’s total assets.
VHT’s mid-section with moderate exposure is comprised of Communication Services, Energy, Financial Services, Industrials, and Technology stocks at 0.0%, 0.0%, 0.02%, 0.05%, and 0.05%.
The Dimensional U.S. Core Equity 2 ETF (DFAC) has the most exposure to the Technology sector at 22.81%. This is followed by Financial Services and Industrials at 16.17% and 14.13% respectively. Utilities (1.54%), Energy (2.67%), and Basic Materials (3.56%) only make up 7.77% of the fund’s total assets.
DFAC’s mid-section with moderate exposure is comprised of Consumer Defensive, Communication Services, Healthcare, Consumer Cyclical, and Industrials stocks at 5.94%, 7.63%, 12.09%, 13.09%, and 14.13%.
VHT is 87.48% more exposed to the Healthcare sector than DFAC (99.57% vs 12.09%). VHT’s exposure to Basic Materials and Technology stocks is 3.25% lower and 22.76% lower respectively (0.31% vs. 3.56% and 0.05% vs. 22.81%). In total, Real Estate, Consumer Defensive, and Utilities also make up 7.85% less of the fund’s holdings compared to DFAC (0.00% vs. 7.85%).
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%.
| DFAC Holdings | Weight |
| Apple Inc | 4.7% |
| Microsoft Corp | 3.81% |
| Amazon.com Inc | 2.39% |
| Johnson & Johnson | 1.05% |
| Facebook Inc Class A | 1.05% |
| JPMorgan Chase & Co | 1.0% |
| Alphabet Inc Class C | 0.85% |
| Alphabet Inc Class A | 0.84% |
| Berkshire Hathaway Inc Class B | 0.75% |
| Visa Inc Class A | 0.74% |
DFAC’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Johnson & Johnson, and Facebook Inc Class A at 4.7%, 3.81%, 2.39%, 1.05%, and 1.05%.
JPMorgan Chase & Co (1.0%), Alphabet Inc Class C (0.85%), and Alphabet Inc Class A (0.84%) have a slightly smaller but still significant weight. Berkshire Hathaway Inc Class B and Visa Inc Class A are also represented in the DFAC’s holdings at 0.75% and 0.74%.
Risk Analysis
| VHT | DFAC | |
| Mean Return | 1.33 | 1.19 |
| R-squared | 59.86 | 95.1 |
| Std. Deviation | 13.58 | 15.55 |
| Alpha | 7.99 | -2.75 |
| Beta | 0.75 | 1.12 |
| Sharpe Ratio | 1.13 | 0.88 |
| Treynor Ratio | 20.74 | 11.85 |
The Vanguard Health Care Index Fund ETF Shares (VHT) has a Treynor Ratio of 20.74 with a Mean Return of 1.33 and a Alpha of 7.99. Its Beta is 0.75 while VHT’s Standard Deviation is 13.58. Furthermore, the fund has a R-squared of 59.86 and a Sharpe Ratio of 1.13.
The Dimensional U.S. Core Equity 2 ETF (DFAC) has a Alpha of -2.75 with a Sharpe Ratio of 0.88 and a Mean Return of 1.19. Its Standard Deviation is 15.55 while DFAC’s R-squared is 95.1. Furthermore, the fund has a Treynor Ratio of 11.85 and a Beta of 1.12.
VHT’s Mean Return is 0.14 points higher than that of DFAC and its R-squared is 35.24 points lower. With a Standard Deviation of 13.58, VHT is slightly less volatile than DFAC. The Alpha and Beta of VHT are 10.74 points higher and 0.37 points lower than DFAC’s Alpha and Beta.
Performance
Annual Returns
| Year | VHT | DFAC |
| 2020 | 18.21% | 15.8% |
| 2019 | 21.97% | 29.54% |
| 2018 | 5.55% | -9.43% |
| 2017 | 23.34% | 18.82% |
| 2016 | -3.33% | 16.31% |
| 2015 | 7.22% | -2.53% |
| 2014 | 25.38% | 9.56% |
| 2013 | 42.67% | 37.55% |
| 2012 | 19.1% | 17.93% |
| 2011 | 10.57% | -1.96% |
| 2010 | 5.75% | 21.67% |
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 2013 was the strongest year for DFAC, returning 37.55% on an annual basis. The poorest year for DFAC in the last ten years was 2018, with a yield of -9.43%. Most years the Dimensional U.S. Core Equity 2 ETF has given investors modest returns, such as in 2020, 2016, and 2012, when gains were 15.8%, 16.31%, and 17.93% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| VHT | $10,000 | $48,464 | 16.04% |
| DFAC | $10,000 | $38,796 | 13.93% |
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 DFAC, the end total would have been $38,796. This equates to a $28,796 profit over 11 years and a compound annual growth rate (CAGR) of 13.93%.
VHT’s CAGR is 2.11 percentage points higher than that of DFAC and as a result, would have yielded $9,668 more on a $10,000 investment. Thus, VHT outperformed DFAC by 2.11% annually.
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