VIG vs. TLT: What’s The Difference?

The Vanguard Dividend Appreciation Index Fund ETF Shares (VIG) and the iShares 20+ Year Treasury Bond ETF (TLT) are both among the Top 100 ETFs. VIG is a Vanguard Large Blend fund and TLT is a iShares Long Government fund. So, what’s the difference between VIG and TLT? And which fund is better?

The expense ratio of VIG is 0.09 percentage points lower than TLT’s (0.06% vs. 0.15%). VIG also has a high exposure to the industrials sector while TLT is mostly comprised of AAA bonds. Overall, VIG has provided higher returns than TLT over the past ten years.

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

Summary

VIG TLT
Name Vanguard Dividend Appreciation Index Fund ETF Shares iShares 20+ Year Treasury Bond ETF
Category Large Blend Long Government
Issuer Vanguard iShares
AUM 71.92B 15.15B
Avg. Return 13.35% 9.00%
Div. Yield 1.56% 1.5%
Expense Ratio 0.06% 0.15%

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 20+ Year Treasury Bond ETF (TLT) is a Long Government fund that is issued by iShares. It currently has 15.15B total assets under management and has yielded an average annual return of 9.00% over the past 10 years. The fund has a dividend yield of 1.5% with an expense ratio of 0.15%.

VIG’s dividend yield is 0.06% higher than that of TLT (1.56% vs. 1.5%). Also, VIG yielded on average 4.35% more per year over the past decade (13.35% vs. 9.00%). The expense ratio of VIG is 0.09 percentage points lower than TLT’s (0.06% vs. 0.15%).

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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%.

TLT - Holdings

TLT 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%

TLT’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

VIG TLT
Mean Return 1.09 0.63
R-squared 92.2 68.76
Std. Deviation 12.25 12.76
Alpha 0.12 -2.83
Beta 0.86 3.54
Sharpe Ratio 1.01 0.55
Treynor Ratio 14.33 1.82

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

The iShares 20+ Year Treasury Bond ETF (TLT) has a R-squared of 68.76 with a Sharpe Ratio of 0.55 and a Mean Return of 0.63. Its Treynor Ratio is 1.82 while TLT’s Alpha is -2.83. Furthermore, the fund has a Standard Deviation of 12.76 and a Beta of 3.54.

VIG’s Mean Return is 0.46 points higher than that of TLT and its R-squared is 23.44 points higher. With a Standard Deviation of 12.25, VIG is slightly less volatile than TLT. The Alpha and Beta of VIG are 2.95 points higher and 2.68 points lower than TLT’s Alpha and Beta.

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Performance

Annual Returns

VIG vs. TLT - Annual Returns

Year VIG TLT
2020 15.46% 17.92%
2019 29.71% 14.93%
2018 -2.02% -2.07%
2017 22.22% 8.92%
2016 11.84% 1.36%
2015 -1.95% -1.65%
2014 10.06% 27.35%
2013 28.99% -13.91%
2012 11.61% 3.25%
2011 6.21% 33.6%
2010 14.67% 9.25%

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 2011 was the strongest year for TLT, returning 33.6% on an annual basis. The poorest year for TLT in the last ten years was 2013, with a yield of -13.91%. Most years the iShares 20+ Year Treasury Bond ETF has given investors modest returns, such as in 2012, 2017, and 2010, when gains were 3.25%, 8.92%, and 9.25% respectively.

Portfolio Growth

VIG vs. TLT - Portfolio Growth

Fund Initial Balance Final Balance CAGR
VIG $10,000 $37,951 13.35%
TLT $10,000 $23,809 9.00%

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 TLT, the end total would have been $23,809. This equates to a $13,809 profit over 11 years and a compound annual growth rate (CAGR) of 9.00%.

VIG’s CAGR is 4.35 percentage points higher than that of TLT and as a result, would have yielded $14,142 more on a $10,000 investment. Thus, VIG outperformed TLT by 4.35% annually.


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