VO vs. IWS: What’s The Difference?

The Vanguard Mid-Cap Index Fund ETF Shares (VO) and the iShares Russell Mid-Cap Value ETF (IWS) are both among the Top 100 ETFs. VO is a Vanguard Mid-Cap Blend fund and IWS is a iShares Mid-Cap Value fund. So, what’s the difference between VO and IWS? And which fund is better?

The expense ratio of VO is 0.19 percentage points lower than IWS’s (0.04% vs. 0.23%). VO also has a higher exposure to the technology sector and a lower standard deviation. Overall, VO has provided higher returns than IWS over the past ten years.

In this article, we’ll compare VO vs. IWS. We’ll look at performance and annual returns, as well as at their fund composition and risk metrics. Moreover, I’ll also discuss VO’s and IWS’s industry exposure, holdings, and portfolio growth and examine how these affect their overall returns.

Summary

VO IWS
Name Vanguard Mid-Cap Index Fund ETF Shares iShares Russell Mid-Cap Value ETF
Category Mid-Cap Blend Mid-Cap Value
Issuer Vanguard iShares
AUM 154.08B 14.24B
Avg. Return 14.34% 12.35%
Div. Yield 1.23% 1.34%
Expense Ratio 0.04% 0.23%

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 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%.

VO’s dividend yield is 0.11% lower than that of IWS (1.23% vs. 1.34%). Also, VO yielded on average 1.99% more per year over the past decade (14.34% vs. 12.35%). The expense ratio of VO is 0.19 percentage points lower than IWS’s (0.04% vs. 0.23%).

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Fund Composition

Industry Exposure

VO vs. IWS - Industry Exposure

VO IWS
Technology 22.01% 11.39%
Industrials 11.92% 14.6%
Energy 3.82% 4.71%
Communication Services 5.61% 4.08%
Utilities 5.12% 6.97%
Healthcare 13.03% 8.56%
Consumer Defensive 3.25% 4.76%
Real Estate 8.67% 11.71%
Financial Services 11.08% 15.75%
Consumer Cyclical 12.12% 12.07%
Basic Materials 3.36% 5.4%

The Vanguard Mid-Cap Index Fund ETF Shares (VO) has the most exposure to the Technology sector at 22.01%. This is followed by Healthcare and Consumer Cyclical at 13.03% and 12.12% respectively. Basic Materials (3.36%), Energy (3.82%), and Utilities (5.12%) only make up 12.30% of the fund’s total assets.

VO’s mid-section with moderate exposure is comprised of Communication Services, Real Estate, Financial Services, Industrials, and Consumer Cyclical stocks at 5.61%, 8.67%, 11.08%, 11.92%, and 12.12%.

The iShares Russell Mid-Cap Value ETF (IWS) has the most exposure to the Financial Services sector at 15.75%. This is followed by Industrials and Consumer Cyclical at 14.6% and 12.07% respectively. Energy (4.71%), Consumer Defensive (4.76%), and Basic Materials (5.4%) only make up 14.87% of the fund’s total assets.

IWS’s mid-section with moderate exposure is comprised of Utilities, Healthcare, Technology, Real Estate, and Consumer Cyclical stocks at 6.97%, 8.56%, 11.39%, 11.71%, and 12.07%.

VO is 10.62% more exposed to the Technology sector than IWS (22.01% vs 11.39%). VO’s exposure to Healthcare and Consumer Cyclical stocks is 4.47% higher and 0.05% higher respectively (13.03% vs. 8.56% and 12.12% vs. 12.07%). In total, Basic Materials, Energy, and Utilities also make up 4.78% less of the fund’s holdings compared to IWS (12.30% vs. 17.08%).

Holdings

VO - Holdings

VO Holdings Weight
IDEXX Laboratories Inc 0.78%
DocuSign Inc 0.75%
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%
Centene Corp 0.62%
Aptiv PLC 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%.

IWS - Holdings

IWS Holdings Weight
Twitter Inc 0.69%
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%
Aptiv PLC 0.52%
Aflac 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%.

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Risk Analysis

VO IWS
Mean Return 1.14 1.06
R-squared 92.22 87.04
Std. Deviation 15.65 16.03
Alpha -2.71 -4.11
Beta 1.11 1.1
Sharpe Ratio 0.83 0.75
Treynor Ratio 11.32 10.3

The Vanguard Mid-Cap Index Fund ETF Shares (VO) has a Beta of 1.11 with a Sharpe Ratio of 0.83 and a R-squared of 92.22. Its Standard Deviation is 15.65 while VO’s Alpha is -2.71. Furthermore, the fund has a Mean Return of 1.14 and a Treynor Ratio of 11.32.

The iShares Russell Mid-Cap Value ETF (IWS) has a R-squared of 87.04 with a Treynor Ratio of 10.3 and a Sharpe Ratio of 0.75. Its Alpha is -4.11 while IWS’s Standard Deviation is 16.03. Furthermore, the fund has a Beta of 1.1 and a Mean Return of 1.06.

VO’s Mean Return is 0.08 points higher than that of IWS and its R-squared is 5.18 points higher. With a Standard Deviation of 15.65, VO is slightly less volatile than IWS. The Alpha and Beta of VO are 1.40 points higher and 0.01 points higher than IWS’s Alpha and Beta.

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Performance

Annual Returns

VO vs. IWS - Annual Returns

Year VO IWS
2020 18.22% 4.76%
2019 31.04% 26.78%
2018 -9.21% -12.36%
2017 19.25% 13.1%
2016 11.23% 19.69%
2015 -1.34% -4.93%
2014 13.76% 14.49%
2013 35.15% 33.11%
2012 15.98% 18.27%
2011 -1.96% -1.55%
2010 25.57% 24.46%

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 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.

Portfolio Growth

VO vs. IWS - Portfolio Growth

Fund Initial Balance Final Balance CAGR
VO $10,000 $40,404 14.34%
IWS $10,000 $33,083 12.35%

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 IWS, the end total would have been $33,083. This equates to a $23,083 profit over 11 years and a compound annual growth rate (CAGR) of 12.35%.

VO’s CAGR is 1.99 percentage points higher than that of IWS and as a result, would have yielded $7,321 more on a $10,000 investment. Thus, VO outperformed IWS by 1.99% annually.


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