VHT vs. IWS: What’s The Difference?

The Vanguard Health Care Index Fund ETF Shares (VHT) and the iShares Russell Mid-Cap Value ETF (IWS) are both among the Top 100 ETFs. VHT is a Vanguard Health fund and IWS is a iShares Mid-Cap Value fund. So, what’s the difference between VHT and IWS? And which fund is better?

The expense ratio of VHT is 0.13 percentage points lower than IWS’s (0.1% vs. 0.23%). VHT also has a higher exposure to the healthcare sector and a lower standard deviation. Overall, VHT has provided higher returns than IWS over the past 11 years.

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

Summary

VHT IWS
Name Vanguard Health Care Index Fund ETF Shares iShares Russell Mid-Cap Value ETF
Category Health Mid-Cap Value
Issuer Vanguard iShares
AUM 17.94B 14.24B
Avg. Return 16.04% 12.35%
Div. Yield 1.15% 1.34%
Expense Ratio 0.1% 0.23%

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 Russell Mid-Cap Value ETF (IWS) is a Mid-Cap Value fund that is issued by iShares. It currently has 14.24B total assets under management and has yielded an average annual return of 12.35% over the past 10 years. The fund has a dividend yield of 1.34% with an expense ratio of 0.23%.

VHT’s dividend yield is 0.19% lower than that of IWS (1.15% vs. 1.34%). Also, VHT yielded on average 3.69% more per year over the past decade (16.04% vs. 12.35%). The expense ratio of VHT is 0.13 percentage points lower than IWS’s (0.1% vs. 0.23%).

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Fund Composition

Industry Exposure

VHT vs. IWS - Industry Exposure

VHT IWS
Technology 0.05% 11.39%
Industrials 0.05% 14.6%
Energy 0.0% 4.71%
Communication Services 0.0% 4.08%
Utilities 0.0% 6.97%
Healthcare 99.57% 8.56%
Consumer Defensive 0.0% 4.76%
Real Estate 0.0% 11.71%
Financial Services 0.02% 15.75%
Consumer Cyclical 0.0% 12.07%
Basic Materials 0.31% 5.4%

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 iShares Russell Mid-Cap Value ETF (IWS) has the most exposure to the Financial Services sector at 15.75%. This is followed by Industrials and Consumer Cyclical at 14.6% and 12.07% respectively. Energy (4.71%), Consumer Defensive (4.76%), and Basic Materials (5.4%) only make up 14.87% of the fund’s total assets.

IWS’s mid-section with moderate exposure is comprised of Utilities, Healthcare, Technology, Real Estate, and Consumer Cyclical stocks at 6.97%, 8.56%, 11.39%, 11.71%, and 12.07%.

VHT is 91.01% more exposed to the Healthcare sector than IWS (99.57% vs 8.56%). VHT’s exposure to Basic Materials and Technology stocks is 5.09% lower and 11.34% lower respectively (0.31% vs. 5.4% and 0.05% vs. 11.39%). In total, Real Estate, Consumer Defensive, and Utilities also make up 23.44% less of the fund’s holdings compared to IWS (0.00% vs. 23.44%).

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%.

IWS - Holdings

IWS Holdings Weight
Twitter Inc 0.69%
Marvell Technology Inc 0.69%
IHS Markit Ltd 0.62%
Prudential Financial Inc 0.56%
Otis Worldwide Corp Ordinary Shares 0.54%
International Flavors & Fragrances Inc 0.53%
Xcel Energy Inc 0.52%
Motorola Solutions Inc 0.52%
Aptiv PLC 0.52%
Aflac Inc 0.52%

IWS’s Top Holdings are Twitter Inc, Marvell Technology Inc, IHS Markit Ltd, Prudential Financial Inc, and Otis Worldwide Corp Ordinary Shares at 0.69%, 0.69%, 0.62%, 0.56%, and 0.54%.

International Flavors & Fragrances Inc (0.53%), Xcel Energy Inc (0.52%), and Motorola Solutions Inc (0.52%) have a slightly smaller but still significant weight. Aptiv PLC and Aflac Inc are also represented in the IWS’s holdings at 0.52% and 0.52%.

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Risk Analysis

VHT IWS
Mean Return 1.33 1.06
R-squared 59.86 87.04
Std. Deviation 13.58 16.03
Alpha 7.99 -4.11
Beta 0.75 1.1
Sharpe Ratio 1.13 0.75
Treynor Ratio 20.74 10.3

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

The iShares Russell Mid-Cap Value ETF (IWS) has a Sharpe Ratio of 0.75 with a R-squared of 87.04 and a Treynor Ratio of 10.3. Its Mean Return is 1.06 while IWS’s Alpha is -4.11. Furthermore, the fund has a Standard Deviation of 16.03 and a Beta of 1.1.

VHT’s Mean Return is 0.27 points higher than that of IWS and its R-squared is 27.18 points lower. With a Standard Deviation of 13.58, VHT is slightly less volatile than IWS. The Alpha and Beta of VHT are 12.10 points higher and 0.35 points lower than IWS’s Alpha and Beta.

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Performance

Annual Returns

VHT vs. IWS - Annual Returns

Year VHT IWS
2020 18.21% 4.76%
2019 21.97% 26.78%
2018 5.55% -12.36%
2017 23.34% 13.1%
2016 -3.33% 19.69%
2015 7.22% -4.93%
2014 25.38% 14.49%
2013 42.67% 33.11%
2012 19.1% 18.27%
2011 10.57% -1.55%
2010 5.75% 24.46%

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 IWS, returning 33.11% on an annual basis. The poorest year for IWS in the last ten years was 2018, with a yield of -12.36%. Most years the iShares Russell Mid-Cap Value ETF has given investors modest returns, such as in 2017, 2014, and 2012, when gains were 13.1%, 14.49%, and 18.27% respectively.

Portfolio Growth

VHT vs. IWS - Portfolio Growth

Fund Initial Balance Final Balance CAGR
VHT $10,000 $48,464 16.04%
IWS $10,000 $33,083 12.35%

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 IWS, the end total would have been $33,083. This equates to a $23,083 profit over 11 years and a compound annual growth rate (CAGR) of 12.35%.

VHT’s CAGR is 3.69 percentage points higher than that of IWS and as a result, would have yielded $15,381 more on a $10,000 investment. Thus, VHT outperformed IWS by 3.69% annually.


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