The Vanguard Mid-Cap Index Fund ETF Shares (VO) and the iShares 7-10 Year Treasury Bond ETF (IEF) are both among the Top 100 ETFs. VO is a Vanguard Mid-Cap Blend fund and IEF is a iShares Long Government fund. So, what’s the difference between VO and IEF? And which fund is better?
The expense ratio of VO is 0.11 percentage points lower than IEF’s (0.04% vs. 0.15%). VO also has a high exposure to the technology sector while IEF is mostly comprised of AAA bonds. Overall, VO has provided higher returns than IEF over the past ten years.
In this article, we’ll compare VO vs. IEF. We’ll look at fund composition and industry exposure, as well as at their holdings and annual returns. Moreover, I’ll also discuss VO’s and IEF’s risk metrics, performance, and portfolio growth and examine how these affect their overall returns.
|Name||Vanguard Mid-Cap Index Fund ETF Shares||iShares 7-10 Year Treasury Bond ETF|
|Category||Mid-Cap Blend||Long 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 7-10 Year Treasury Bond ETF (IEF) is a Long Government fund that is issued by iShares. It currently has 13.44B total assets under management and has yielded an average annual return of 5.06% over the past 10 years. The fund has a dividend yield of 0.84% with an expense ratio of 0.15%.
VO’s dividend yield is 0.39% higher than that of IEF (1.23% vs. 0.84%). Also, VO yielded on average 9.27% more per year over the past decade (14.34% vs. 5.06%). The expense ratio of VO is 0.11 percentage points lower than IEF’s (0.04% vs. 0.15%).
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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%.
|IEF Bond Sectors||Weight|
IEF’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 Alpha of -2.71 with a Sharpe Ratio of 0.83 and a Treynor Ratio of 11.32. Its Beta is 1.11 while VO’s Mean Return is 1.14. Furthermore, the fund has a Standard Deviation of 15.65 and a R-squared of 92.22.
The iShares 7-10 Year Treasury Bond ETF (IEF) has a Standard Deviation of 5.42 with a Mean Return of 0.32 and a Sharpe Ratio of 0.6. Its R-squared is 77.56 while IEF’s Beta is 1.59. Furthermore, the fund has a Treynor Ratio of 1.97 and a Alpha of -1.2.
VO’s Mean Return is 0.82 points higher than that of IEF and its R-squared is 14.66 points higher. With a Standard Deviation of 15.65, VO is slightly more volatile than IEF. The Alpha and Beta of VO are 1.51 points lower and 0.48 points lower than IEF’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 2011 was the strongest year for IEF, returning 15.46% on an annual basis. The poorest year for IEF in the last ten years was 2013, with a yield of -6.12%. Most years the iShares 7-10 Year Treasury Bond ETF has given investors modest returns, such as in 2017, 2012, and 2019, when gains were 2.47%, 4.06%, and 8.38% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in VO would have resulted in a final balance of $40,404. This is a profit of $30,404 over 11 years and amounts to a compound annual growth rate (CAGR) of 14.34%.
With a $10,000 investment in IEF, the end total would have been $16,936. This equates to a $6,936 profit over 11 years and a compound annual growth rate (CAGR) of 5.06%.
VO’s CAGR is 9.27 percentage points higher than that of IEF and as a result, would have yielded $23,468 more on a $10,000 investment. Thus, VO outperformed IEF by 9.27% annually.
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