The Vanguard Mid-Cap Index Fund ETF Shares (VO) and the iShares U.S. Treasury Bond ETF (GOVT) are both among the Top 100 ETFs. VO is a Vanguard Mid-Cap Blend fund and GOVT is a iShares Intermediate Government fund. So, what’s the difference between VO and GOVT? And which fund is better?
The expense ratio of VO is 0.01 percentage points lower than GOVT’s (0.04% vs. 0.05%). VO also has a high exposure to the technology sector while GOVT is mostly comprised of AAA bonds. Overall, VO has provided higher returns than GOVT over the past ten years.
In this article, we’ll compare VO vs. GOVT. We’ll look at risk metrics and annual returns, as well as at their holdings and performance. Moreover, I’ll also discuss VO’s and GOVT’s portfolio growth, industry exposure, and fund composition and examine how these affect their overall returns.
|Name||Vanguard Mid-Cap Index Fund ETF Shares||iShares U.S. Treasury Bond ETF|
|Category||Mid-Cap Blend||Intermediate Government|
The Vanguard Mid-Cap Index Fund ETF Shares (VO) is a Mid-Cap Blend fund that is issued by Vanguard. It currently has 154.08B total assets under management and has yielded an average annual return of 14.34% over the past 10 years. The fund has a dividend yield of 1.23% with an expense ratio of 0.04%.
The iShares U.S. Treasury Bond ETF (GOVT) is a Intermediate Government fund that is issued by iShares. It currently has 17.07B total assets under management and has yielded an average annual return of 2.67% over the past 10 years. The fund has a dividend yield of 1.0% with an expense ratio of 0.05%.
VO’s dividend yield is 0.23% higher than that of GOVT (1.23% vs. 1.0%). Also, VO yielded on average 11.66% more per year over the past decade (14.34% vs. 2.67%). The expense ratio of VO is 0.01 percentage points lower than GOVT’s (0.04% vs. 0.05%).
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|IDEXX Laboratories Inc||0.78%|
|Marvell Technology Inc||0.68%|
|IQVIA Holdings Inc||0.68%|
|Chipotle Mexican Grill Inc||0.63%|
|Veeva Systems Inc Class A||0.62%|
|Digital Realty Trust Inc||0.62%|
|Carrier Global Corp Ordinary Shares||0.61%|
VO’s Top Holdings are IDEXX Laboratories Inc, DocuSign Inc, Marvell Technology Inc, IQVIA Holdings Inc, and Chipotle Mexican Grill Inc at 0.78%, 0.75%, 0.68%, 0.68%, and 0.63%.
Veeva Systems Inc Class A (0.62%), Digital Realty Trust Inc (0.62%), and Centene Corp (0.62%) have a slightly smaller but still significant weight. Aptiv PLC and Carrier Global Corp Ordinary Shares are also represented in the VO’s holdings at 0.62% and 0.61%.
|GOVT Bond Sectors||Weight|
GOVT’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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The Vanguard Mid-Cap Index Fund ETF Shares (VO) has a Mean Return of 1.14 with a Beta of 1.11 and a R-squared of 92.22. Its Alpha is -2.71 while VO’s Standard Deviation is 15.65. Furthermore, the fund has a Treynor Ratio of 11.32 and a Sharpe Ratio of 0.83.
The iShares U.S. Treasury Bond ETF (GOVT) has a Treynor Ratio of 0 with a Beta of 0 and a Alpha of 0. Its Mean Return is 0 while GOVT’s R-squared is 0. Furthermore, the fund has a Standard Deviation of 0 and a Sharpe Ratio of 0.
VO’s Mean Return is 1.14 points higher than that of GOVT and its R-squared is 92.22 points higher. With a Standard Deviation of 15.65, VO is slightly more volatile than GOVT. The Alpha and Beta of VO are 2.71 points lower and 1.11 points higher than GOVT’s Alpha and Beta.
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VO had its best year in 2013 with an annual return of 35.15%. VO’s worst year over the past decade yielded -9.21% and occurred in 2018. In most years the Vanguard Mid-Cap Index Fund ETF Shares provided moderate returns such as in 2014, 2012, and 2020 where annual returns amounted to 13.76%, 15.98%, and 18.22% respectively.
The year 2020 was the strongest year for GOVT, returning 7.92% on an annual basis. The poorest year for GOVT in the last ten years was 2013, with a yield of -2.84%. Most years the iShares U.S. Treasury Bond ETF has given investors modest returns, such as in 2018, 2015, and 2016, when gains were 0.74%, 0.76%, and 0.92% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in VO would have resulted in a final balance of $28,298. This is a profit of $18,298 over 8 years and amounts to a compound annual growth rate (CAGR) of 14.34%.
With a $10,000 investment in GOVT, the end total would have been $12,297. This equates to a $2,297 profit over 8 years and a compound annual growth rate (CAGR) of 2.67%.
VO’s CAGR is 11.66 percentage points higher than that of GOVT and as a result, would have yielded $16,001 more on a $10,000 investment. Thus, VO outperformed GOVT by 11.66% annually.
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