VHT vs. GOVT: What’s The Difference?

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

The expense ratio of VHT is 0.05 percentage points higher than GOVT’s (0.1% vs. 0.05%). VHT also has a high exposure to the healthcare sector while GOVT is mostly comprised of AAA bonds. Overall, VHT has provided higher returns than GOVT over the past 8 years.

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

Summary

VHT GOVT
Name Vanguard Health Care Index Fund ETF Shares iShares U.S. Treasury Bond ETF
Category Health Intermediate Government
Issuer Vanguard iShares
AUM 17.94B 17.07B
Avg. Return 16.04% 2.67%
Div. Yield 1.15% 1.0%
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 iShares U.S. Treasury Bond ETF (GOVT) is a Intermediate Government fund that is issued by iShares. It currently has 17.07B total assets under management and has yielded an average annual return of 2.67% over the past 10 years. The fund has a dividend yield of 1.0% with an expense ratio of 0.05%.

VHT’s dividend yield is 0.15% higher than that of GOVT (1.15% vs. 1.0%). Also, VHT yielded on average 13.37% more per year over the past decade (16.04% vs. 2.67%). The expense ratio of VHT is 0.05 percentage points higher than GOVT’s (0.1% vs. 0.05%).

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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%.

GOVT - Holdings

GOVT 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%

GOVT’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.

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Risk Analysis

VHT GOVT
Mean Return 1.33 0
R-squared 59.86 0
Std. Deviation 13.58 0
Alpha 7.99 0
Beta 0.75 0
Sharpe Ratio 1.13 0
Treynor Ratio 20.74 0

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

The iShares U.S. Treasury Bond ETF (GOVT) has a Treynor Ratio of 0 with a R-squared of 0 and a Standard Deviation of 0. Its Beta is 0 while GOVT’s Sharpe Ratio is 0. Furthermore, the fund has a Alpha of 0 and a Mean Return of 0.

VHT’s Mean Return is 1.33 points higher than that of GOVT and its R-squared is 59.86 points higher. With a Standard Deviation of 13.58, VHT is slightly more volatile than GOVT. The Alpha and Beta of VHT are 7.99 points higher and 0.75 points higher than GOVT’s Alpha and Beta.

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Performance

Annual Returns

VHT vs. GOVT - Annual Returns

Year VHT GOVT
2020 18.21% 7.92%
2019 21.97% 6.71%
2018 5.55% 0.74%
2017 23.34% 2.19%
2016 -3.33% 0.92%
2015 7.22% 0.76%
2014 25.38% 4.99%
2013 42.67% -2.84%
2012 19.1% 0.0%
2011 10.57% 0.0%
2010 5.75% 0.0%

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 2020 was the strongest year for GOVT, returning 7.92% on an annual basis. The poorest year for GOVT in the last ten years was 2013, with a yield of -2.84%. Most years the iShares U.S. Treasury Bond ETF has given investors modest returns, such as in 2018, 2015, and 2016, when gains were 0.74%, 0.76%, and 0.92% respectively.

Portfolio Growth

VHT vs. GOVT - Portfolio Growth

Fund Initial Balance Final Balance CAGR
VHT $10,000 $34,801 16.04%
GOVT $10,000 $12,297 2.67%

A $10,000 investment in VHT would have resulted in a final balance of $34,801. This is a profit of $24,801 over 8 years and amounts to a compound annual growth rate (CAGR) of 16.04%.

With a $10,000 investment in GOVT, the end total would have been $12,297. This equates to a $2,297 profit over 8 years and a compound annual growth rate (CAGR) of 2.67%.

VHT’s CAGR is 13.37 percentage points higher than that of GOVT and as a result, would have yielded $22,504 more on a $10,000 investment. Thus, VHT outperformed GOVT by 13.37% annually.


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