The Vanguard Dividend Appreciation Index Fund ETF Shares (VIG) and the Vanguard Mortgage-Backed Securities Index Fund ETF Shares (VMBS) are both among the Top 100 ETFs. VIG is a Vanguard Large Blend fund and VMBS is a Vanguard Intermediate Government fund. So, what’s the difference between VIG and VMBS? And which fund is better?
The expense ratio of VIG is 0.01 percentage points higher than VMBS’s (0.06% vs. 0.05%). VIG also has a high exposure to the industrials sector while VMBS is mostly comprised of AAA bonds. Overall, VIG has provided higher returns than VMBS over the past ten years.
In this article, we’ll compare VIG vs. VMBS. We’ll look at annual returns and holdings, as well as at their performance and portfolio growth. Moreover, I’ll also discuss VIG’s and VMBS’s fund composition, industry exposure, and risk metrics and examine how these affect their overall returns.
|Name||Vanguard Dividend Appreciation Index Fund ETF Shares||Vanguard Mortgage-Backed Securities Index Fund ETF Shares|
|Category||Large Blend||Intermediate Government|
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 Vanguard Mortgage-Backed Securities Index Fund ETF Shares (VMBS) is a Intermediate Government fund that is issued by Vanguard. It currently has 16.61B total assets under management and has yielded an average annual return of 2.89% over the past 10 years. The fund has a dividend yield of 1.23% with an expense ratio of 0.05%.
VIG’s dividend yield is 0.33% higher than that of VMBS (1.56% vs. 1.23%). Also, VIG yielded on average 10.45% more per year over the past decade (13.35% vs. 2.89%). The expense ratio of VIG is 0.01 percentage points higher than VMBS’s (0.06% vs. 0.05%).
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|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%.
|VMBS Bond Sectors||Weight|
VMBS’s Top Bond Sectors are ratings of AAA, Below B, B, BB, and BBB at 100.01%, 0.0%, 0.0%, 0.0%, and 0.0%. The fund is less weighted towards A (0.0%), AA (0.0%), and US Government (0.0%) rated bonds.
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The Vanguard Dividend Appreciation Index Fund ETF Shares (VIG) has a Alpha of 0.12 with a R-squared of 92.2 and a Beta of 0.86. Its Sharpe Ratio is 1.01 while VIG’s Standard Deviation is 12.25. Furthermore, the fund has a Mean Return of 1.09 and a Treynor Ratio of 14.33.
The Vanguard Mortgage-Backed Securities Index Fund ETF Shares (VMBS) has a Standard Deviation of 2.02 with a Mean Return of 0.21 and a Alpha of 0.37. Its Beta is 0.54 while VMBS’s R-squared is 65.78. Furthermore, the fund has a Sharpe Ratio of 0.94 and a Treynor Ratio of 3.47.
VIG’s Mean Return is 0.88 points higher than that of VMBS and its R-squared is 26.42 points higher. With a Standard Deviation of 12.25, VIG is slightly more volatile than VMBS. The Alpha and Beta of VIG are 0.25 points lower and 0.32 points higher than VMBS’s Alpha and Beta.
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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 VMBS, returning 6.17% on an annual basis. The poorest year for VMBS in the last ten years was 2013, with a yield of -1.28%. Most years the Vanguard Mortgage-Backed Securities Index Fund ETF Shares has given investors modest returns, such as in 2017, 2012, and 2020, when gains were 2.37%, 2.47%, and 3.77% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in VIG would have resulted in a final balance of $33,096. This is a profit of $23,096 over 10 years and amounts to a compound annual growth rate (CAGR) of 13.35%.
With a $10,000 investment in VMBS, the end total would have been $13,265. This equates to a $3,265 profit over 10 years and a compound annual growth rate (CAGR) of 2.89%.
VIG’s CAGR is 10.45 percentage points higher than that of VMBS and as a result, would have yielded $19,831 more on a $10,000 investment. Thus, VIG outperformed VMBS by 10.45% annually.
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