The Vanguard Mortgage-Backed Securities Index Fund ETF Shares (VMBS) and the iShares Russell Mid-Cap Value ETF (IWS) are both among the Top 100 ETFs. VMBS is a Vanguard Intermediate Government fund and IWS is a iShares Mid-Cap Value fund. So, what’s the difference between VMBS and IWS? And which fund is better?
The expense ratio of VMBS is 0.18 percentage points lower than IWS’s (0.05% vs. 0.23%). VMBS is mostly comprised of AAA bonds while IWS has a high exposure to the financial services sector. Overall, VMBS has provided lower returns than IWS over the past 10 years.
In this article, we’ll compare VMBS vs. IWS. We’ll look at risk metrics and fund composition, as well as at their annual returns and portfolio growth. Moreover, I’ll also discuss VMBS’s and IWS’s performance, industry exposure, and holdings and examine how these affect their overall returns.
|Name||Vanguard Mortgage-Backed Securities Index Fund ETF Shares||iShares Russell Mid-Cap Value ETF|
|Category||Intermediate Government||Mid-Cap Value|
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%.
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%.
VMBS’s dividend yield is 0.11% lower than that of IWS (1.23% vs. 1.34%). Also, VMBS yielded on average 9.45% less per year over the past decade (2.89% vs. 12.35%). The expense ratio of VMBS is 0.18 percentage points lower than IWS’s (0.05% vs. 0.23%).
|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.
|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%|
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%.
The Vanguard Mortgage-Backed Securities Index Fund ETF Shares (VMBS) has a Alpha of 0.37 with a Treynor Ratio of 3.47 and a Sharpe Ratio of 0.94. Its Mean Return is 0.21 while VMBS’s Beta is 0.54. Furthermore, the fund has a Standard Deviation of 2.02 and a R-squared of 65.78.
The iShares Russell Mid-Cap Value ETF (IWS) has a R-squared of 87.04 with a Treynor Ratio of 10.3 and a Alpha of -4.11. Its Sharpe Ratio is 0.75 while IWS’s Standard Deviation is 16.03. Furthermore, the fund has a Beta of 1.1 and a Mean Return of 1.06.
VMBS’s Mean Return is 0.85 points lower than that of IWS and its R-squared is 21.26 points lower. With a Standard Deviation of 2.02, VMBS is slightly less volatile than IWS. The Alpha and Beta of VMBS are 4.48 points higher and 0.56 points lower than IWS’s Alpha and Beta.
VMBS had its best year in 2019 with an annual return of 6.17%. VMBS’s worst year over the past decade yielded -1.28% and occurred in 2013. In most years the Vanguard Mortgage-Backed Securities Index Fund ETF Shares provided moderate returns such as in 2017, 2012, and 2020 where annual returns amounted to 2.37%, 2.47%, and 3.77% 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.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in VMBS would have resulted in a final balance of $13,265. This is a profit of $3,265 over 10 years and amounts to a compound annual growth rate (CAGR) of 2.89%.
With a $10,000 investment in IWS, the end total would have been $26,581. This equates to a $16,581 profit over 10 years and a compound annual growth rate (CAGR) of 12.35%.
VMBS’s CAGR is 9.45 percentage points lower than that of IWS and as a result, would have yielded $13,316 less on a $10,000 investment. Thus, VMBS performed worse than IWS by 9.45% annually.
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