VIG vs. MBB: What’s The Difference?

The Vanguard Dividend Appreciation Index Fund ETF Shares (VIG) and the iShares MBS ETF (MBB) are both among the Top 100 ETFs. VIG is a Vanguard Large Blend fund and MBB is a iShares Intermediate Government fund. So, what’s the difference between VIG and MBB? And which fund is better?

VIG and MBB have the same expense ratio: 0.06%. VIG also has a high exposure to the industrials sector while MBB is mostly comprised of AAA bonds. Overall, VIG has provided higher returns than MBB over the past ten years.

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

Summary

VIG MBB
Name Vanguard Dividend Appreciation Index Fund ETF Shares iShares MBS ETF
Category Large Blend Intermediate Government
Issuer Vanguard iShares
AUM 71.92B 25.69B
Avg. Return 13.35% 3.08%
Div. Yield 1.56% 1.88%
Expense Ratio 0.06% 0.06%

The Vanguard Dividend Appreciation Index Fund ETF Shares (VIG) is a Large Blend fund that is issued by Vanguard. It currently has 71.92B total assets under management and has yielded an average annual return of 13.35% over the past 10 years. The fund has a dividend yield of 1.56% with an expense ratio of 0.06%.

The iShares MBS ETF (MBB) is a Intermediate Government fund that is issued by iShares. It currently has 25.69B total assets under management and has yielded an average annual return of 3.08% over the past 10 years. The fund has a dividend yield of 1.88% with an expense ratio of 0.06%.

VIG’s dividend yield is 0.32% lower than that of MBB (1.56% vs. 1.88%). Also, VIG yielded on average 10.27% more per year over the past decade (13.35% vs. 3.08%). VIG and MBB have the same expense ratio: 0.06%.

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Fund Composition

Holdings

VIG - Holdings

VIG Holdings Weight
Microsoft Corp 4.19%
JPMorgan Chase & Co 3.8%
Johnson & Johnson 3.67%
Walmart Inc 3.38%
Visa Inc Class A 3.22%
UnitedHealth Group Inc 3.22%
The Home Depot Inc 2.91%
Procter & Gamble Co 2.82%
Comcast Corp Class A 2.21%
Coca-Cola Co 1.98%

VIG’s Top Holdings are Microsoft Corp, JPMorgan Chase & Co, Johnson & Johnson, Walmart Inc, and Visa Inc Class A at 4.19%, 3.8%, 3.67%, 3.38%, and 3.22%.

UnitedHealth Group Inc (3.22%), The Home Depot Inc (2.91%), and Procter & Gamble Co (2.82%) have a slightly smaller but still significant weight. Comcast Corp Class A and Coca-Cola Co are also represented in the VIG’s holdings at 2.21% and 1.98%.

MBB - Holdings

MBB Bond Sectors Weight
AAA 99.51%
Others 0.49%
Below B 0.0%
B 0.0%
BB 0.0%
BBB 0.0%
A 0.0%
AA 0.0%
US Government 0.0%

MBB’s Top Bond Sectors are ratings of AAA, Others, Below B, B, and BB at 99.51%, 0.49%, 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

VIG MBB
Mean Return 1.09 0.2
R-squared 92.2 74.38
Std. Deviation 12.25 2.12
Alpha 0.12 0.14
Beta 0.86 0.6
Sharpe Ratio 1.01 0.87
Treynor Ratio 14.33 3.02

The Vanguard Dividend Appreciation Index Fund ETF Shares (VIG) has a Standard Deviation of 12.25 with a R-squared of 92.2 and a Beta of 0.86. Its Alpha is 0.12 while VIG’s Mean Return is 1.09. Furthermore, the fund has a Sharpe Ratio of 1.01 and a Treynor Ratio of 14.33.

The iShares MBS ETF (MBB) has a Alpha of 0.14 with a Sharpe Ratio of 0.87 and a R-squared of 74.38. Its Treynor Ratio is 3.02 while MBB’s Standard Deviation is 2.12. Furthermore, the fund has a Beta of 0.6 and a Mean Return of 0.2.

VIG’s Mean Return is 0.89 points higher than that of MBB and its R-squared is 17.82 points higher. With a Standard Deviation of 12.25, VIG is slightly more volatile than MBB. The Alpha and Beta of VIG are 0.02 points lower and 0.26 points higher than MBB’s Alpha and Beta.

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Performance

Annual Returns

VIG vs. MBB - Annual Returns

Year VIG MBB
2020 15.46% 4.03%
2019 29.71% 6.27%
2018 -2.02% 0.81%
2017 22.22% 2.37%
2016 11.84% 1.28%
2015 -1.95% 1.28%
2014 10.06% 6.16%
2013 28.99% -1.92%
2012 11.61% 2.23%
2011 6.21% 5.88%
2010 14.67% 5.44%

VIG had its best year in 2019 with an annual return of 29.71%. VIG’s worst year over the past decade yielded -2.02% and occurred in 2018. In most years the Vanguard Dividend Appreciation Index Fund ETF Shares provided moderate returns such as in 2012, 2016, and 2010 where annual returns amounted to 11.61%, 11.84%, and 14.67% respectively.

The year 2019 was the strongest year for MBB, returning 6.27% on an annual basis. The poorest year for MBB in the last ten years was 2013, with a yield of -1.92%. Most years the iShares MBS ETF has given investors modest returns, such as in 2012, 2017, and 2020, when gains were 2.23%, 2.37%, and 4.03% respectively.

Portfolio Growth

VIG vs. MBB - Portfolio Growth

Fund Initial Balance Final Balance CAGR
VIG $10,000 $37,951 13.35%
MBB $10,000 $13,906 3.08%

A $10,000 investment in VIG would have resulted in a final balance of $37,951. This is a profit of $27,951 over 11 years and amounts to a compound annual growth rate (CAGR) of 13.35%.

With a $10,000 investment in MBB, the end total would have been $13,906. This equates to a $3,906 profit over 11 years and a compound annual growth rate (CAGR) of 3.08%.

VIG’s CAGR is 10.27 percentage points higher than that of MBB and as a result, would have yielded $24,045 more on a $10,000 investment. Thus, VIG outperformed MBB by 10.27% annually.


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