The Vanguard Dividend Appreciation Index Fund ETF Shares (VIG) and the iShares MSCI USA Quality Factor ETF (QUAL) are both among the Top 100 ETFs. VIG is a Vanguard Large Blend fund and QUAL is a iShares Large Blend fund. So, what’s the difference between VIG and QUAL? And which fund is better?
The expense ratio of VIG is 0.09 percentage points lower than QUAL’s (0.06% vs. 0.15%). VIG also has a higher exposure to the industrials sector and a higher standard deviation. Overall, VIG has provided lower returns than QUAL over the past ten years.
In this article, we’ll compare VIG vs. QUAL. We’ll look at fund composition and holdings, as well as at their industry exposure and annual returns. Moreover, I’ll also discuss VIG’s and QUAL’s risk metrics, portfolio growth, and performance and examine how these affect their overall returns.
|Name||Vanguard Dividend Appreciation Index Fund ETF Shares||iShares MSCI USA Quality Factor ETF|
|Category||Large Blend||Large Blend|
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 MSCI USA Quality Factor ETF (QUAL) is a Large Blend fund that is issued by iShares. It currently has 23.93B total assets under management and has yielded an average annual return of 13.42% over the past 10 years. The fund has a dividend yield of 1.29% with an expense ratio of 0.15%.
VIG’s dividend yield is 0.27% higher than that of QUAL (1.56% vs. 1.29%). Also, VIG yielded on average 0.08% less per year over the past decade (13.35% vs. 13.42%). The expense ratio of VIG is 0.09 percentage points lower than QUAL’s (0.06% vs. 0.15%).
FYI: The best way I've found to invest in ETFs is through M1 Finance. It's free and you even get an instant line of credit! Have a look here (link to M1 Finance).
The Vanguard Dividend Appreciation Index Fund ETF Shares (VIG) has the most exposure to the Industrials sector at 17.23%. This is followed by Financial Services and Healthcare at 17.18% and 15.52% respectively. Energy (0.0%), Utilities (2.81%), and Communication Services (2.86%) only make up 5.67% of the fund’s total assets.
VIG’s mid-section with moderate exposure is comprised of Basic Materials, Consumer Cyclical, Technology, Consumer Defensive, and Healthcare stocks at 3.67%, 10.47%, 14.93%, 15.32%, and 15.52%.
The iShares MSCI USA Quality Factor ETF (QUAL) has the most exposure to the Technology sector at 22.52%. This is followed by Financial Services and Healthcare at 15.87% and 13.22% respectively. Basic Materials (2.35%), Utilities (2.41%), and Real Estate (2.72%) only make up 7.48% of the fund’s total assets.
QUAL’s mid-section with moderate exposure is comprised of Consumer Defensive, Industrials, Consumer Cyclical, Communication Services, and Healthcare stocks at 8.57%, 9.22%, 9.43%, 11.44%, and 13.22%.
VIG is 8.01% more exposed to the Industrials sector than QUAL (17.23% vs 9.22%). VIG’s exposure to Financial Services and Healthcare stocks is 1.31% higher and 2.30% higher respectively (17.18% vs. 15.87% and 15.52% vs. 13.22%). In total, Energy, Utilities, and Communication Services also make up 10.42% less of the fund’s holdings compared to QUAL (5.67% vs. 16.09%).
|JPMorgan Chase & Co||3.8%|
|Johnson & Johnson||3.67%|
|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%|
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%.
|Facebook Inc Class A||4.77%|
|Nike Inc Class B||4.05%|
|Johnson & Johnson||2.99%|
|Mastercard Inc Class A||2.72%|
|Alphabet Inc Class A||2.49%|
QUAL’s Top Holdings are Facebook Inc Class A, Nike Inc Class B, Microsoft Corp, Apple Inc, and Johnson & Johnson at 4.77%, 4.05%, 3.54%, 3.52%, and 2.99%.
BlackRock Inc (2.87%), Target Corp (2.8%), and Mastercard Inc Class A (2.72%) have a slightly smaller but still significant weight. NVIDIA Corp and Alphabet Inc Class A are also represented in the QUAL’s holdings at 2.71% and 2.49%.
NOTE: The easiest way to add diversification to your portfolio is to invest in real estate through Fundrise. You can become private real estate investor without the burden of property management! Check it out here (link to Fundrise).
The Vanguard Dividend Appreciation Index Fund ETF Shares (VIG) has a Sharpe Ratio of 1.01 with a Mean Return of 1.09 and a R-squared of 92.2. Its Treynor Ratio is 14.33 while VIG’s Alpha is 0.12. Furthermore, the fund has a Beta of 0.86 and a Standard Deviation of 12.25.
The iShares MSCI USA Quality Factor ETF (QUAL) has a Standard Deviation of 0 with a Treynor Ratio of 0 and a Alpha of 0. Its Mean Return is 0 while QUAL’s Beta is 0. Furthermore, the fund has a Sharpe Ratio of 0 and a R-squared of 0.
VIG’s Mean Return is 1.09 points higher than that of QUAL and its R-squared is 92.20 points higher. With a Standard Deviation of 12.25, VIG is slightly more volatile than QUAL. The Alpha and Beta of VIG are 0.12 points higher and 0.86 points higher than QUAL’s Alpha and Beta.
BTW: Uncorrelated crypto assets such as Bitcoin can serve as a hedge and mitigate risk. I've allocated around 5% of my portfolio to crypto assets through Coinbase - the simplest and cheapest broker I've found! Click here to read more (link to Coinbase).
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 QUAL, returning 34.14% on an annual basis. The poorest year for QUAL in the last ten years was 2018, with a yield of -5.77%. Most years the iShares MSCI USA Quality Factor ETF has given investors modest returns, such as in 2010, 2015, and 2016, when gains were 0.0%, 5.56%, and 9.18% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in VIG would have resulted in a final balance of $21,645. This is a profit of $11,645 over 7 years and amounts to a compound annual growth rate (CAGR) of 13.35%.
With a $10,000 investment in QUAL, the end total would have been $23,251. This equates to a $13,251 profit over 7 years and a compound annual growth rate (CAGR) of 13.42%.
VIG’s CAGR is 0.08 percentage points lower than that of QUAL and as a result, would have yielded $1,606 less on a $10,000 investment. Thus, VIG performed worse than QUAL by 0.08% annually.
Over the past years, I have discovered several tools and products that have helped me tremendously on my path to financial freedom:
P.S.: The links below are affiliate links, which means I receive a small commission at no extra cost to you when you sign up for one of the services. Thank you for your support!
1) Take a look at M1 Finance, my favorite broker. I love how easy it is to invest and maintain my portfolio with them. I can set up automatic transfers, rebalance my portfolio with one click and even borrow up to 35% of my assets at super low interest rates!
2) Fundrise is by far the best way I've found to invest in Real Estate. You can diversify your portfolio by investing in their eREITs or even allocate capital to individual properties (without the hassle of managing tenants!).
3) If you are interested in crypto, check out Coinbase. I've started allocating a small amount of assets to the growing crypto space and Coinbase has just been a breeze to use. Once you register, make sure to also open an Coinbase Pro account to buy crypto at the lowest fees on the market (just 0.1%!).
To see all of my most up-to-date recommendations, check out the Recommended Tools section.