The Vanguard Mid-Cap Index Fund ETF Shares (VO) and the iShares 1-5 Year Investment Grade Corporate Bond ETF (IGSB) are both among the Top 100 ETFs. VO is a Vanguard Mid-Cap Blend fund and IGSB is a iShares Short-Term Bond fund. So, what’s the difference between VO and IGSB? And which fund is better?
The expense ratio of VO is 0.02 percentage points lower than IGSB’s (0.04% vs. 0.06%). VO also has a high exposure to the technology sector while IGSB is mostly comprised of BBB bonds. Overall, VO has provided higher returns than IGSB over the past ten years.
In this article, we’ll compare VO vs. IGSB. We’ll look at risk metrics and industry exposure, as well as at their performance and portfolio growth. Moreover, I’ll also discuss VO’s and IGSB’s annual returns, holdings, and fund composition and examine how these affect their overall returns.
|Name||Vanguard Mid-Cap Index Fund ETF Shares||iShares 1-5 Year Investment Grade Corporate Bond ETF|
|Category||Mid-Cap Blend||Short-Term Bond|
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 1-5 Year Investment Grade Corporate Bond ETF (IGSB) is a Short-Term Bond fund that is issued by iShares. It currently has 26.63B total assets under management and has yielded an average annual return of 2.51% over the past 10 years. The fund has a dividend yield of 2.02% with an expense ratio of 0.06%.
VO’s dividend yield is 0.79% lower than that of IGSB (1.23% vs. 2.02%). Also, VO yielded on average 11.83% more per year over the past decade (14.34% vs. 2.51%). The expense ratio of VO is 0.02 percentage points lower than IGSB’s (0.04% vs. 0.06%).
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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%.
|IGSB Bond Sectors||Weight|
IGSB’s Top Bond Sectors are ratings of BBB, A, AA, AAA, and BB at 50.48%, 40.04%, 7.46%, 2.21%, and 0.09%. The fund is less weighted towards Below B (0.0%), B (0.0%), and US Government (0.0%) rated bonds.
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The Vanguard Mid-Cap Index Fund ETF Shares (VO) has a Sharpe Ratio of 0.83 with a Standard Deviation of 15.65 and a Alpha of -2.71. Its R-squared is 92.22 while VO’s Treynor Ratio is 11.32. Furthermore, the fund has a Beta of 1.11 and a Mean Return of 1.14.
The iShares 1-5 Year Investment Grade Corporate Bond ETF (IGSB) has a Alpha of 0.69 with a Standard Deviation of 2 and a Sharpe Ratio of 0.82. Its Mean Return is 0.19 while IGSB’s Beta is 0.34. Furthermore, the fund has a R-squared of 26.13 and a Treynor Ratio of 4.82.
VO’s Mean Return is 0.95 points higher than that of IGSB and its R-squared is 66.09 points higher. With a Standard Deviation of 15.65, VO is slightly more volatile than IGSB. The Alpha and Beta of VO are 3.40 points lower and 0.77 points higher than IGSB’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 2019 was the strongest year for IGSB, returning 7.01% on an annual basis. The poorest year for IGSB in the last ten years was 2015, with a yield of 0.7%. Most years the iShares 1-5 Year Investment Grade Corporate Bond ETF has given investors modest returns, such as in 2011, 2017, and 2016, when gains were 1.34%, 1.41%, and 1.77% 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 IGSB, the end total would have been $13,103. This equates to a $3,103 profit over 11 years and a compound annual growth rate (CAGR) of 2.51%.
VO’s CAGR is 11.83 percentage points higher than that of IGSB and as a result, would have yielded $27,301 more on a $10,000 investment. Thus, VO outperformed IGSB by 11.83% annually.
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