The Vanguard Mid-Cap Index Fund ETF Shares (VO) and the iShares MSCI USA Quality Factor ETF (QUAL) are both among the Top 100 ETFs. VO is a Vanguard Mid-Cap Blend fund and QUAL is a iShares Large Blend fund. So, what’s the difference between VO and QUAL? And which fund is better?
The expense ratio of VO is 0.11 percentage points lower than QUAL’s (0.04% vs. 0.15%). VO also has a lower exposure to the technology sector and a higher standard deviation. Overall, VO has provided higher returns than QUAL over the past ten years.
In this article, we’ll compare VO vs. QUAL. We’ll look at portfolio growth and fund composition, as well as at their risk metrics and annual returns. Moreover, I’ll also discuss VO’s and QUAL’s performance, holdings, and industry exposure and examine how these affect their overall returns.
|Name||Vanguard Mid-Cap Index Fund ETF Shares||iShares MSCI USA Quality Factor ETF|
|Category||Mid-Cap Blend||Large Blend|
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 MSCI USA Quality Factor ETF (QUAL) is a Large Blend fund that is issued by iShares. It currently has 23.93B total assets under management and has yielded an average annual return of 13.42% over the past 10 years. The fund has a dividend yield of 1.29% with an expense ratio of 0.15%.
VO’s dividend yield is 0.06% lower than that of QUAL (1.23% vs. 1.29%). Also, VO yielded on average 0.91% more per year over the past decade (14.34% vs. 13.42%). The expense ratio of VO is 0.11 percentage points lower than QUAL’s (0.04% vs. 0.15%).
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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 MSCI USA Quality Factor ETF (QUAL) has the most exposure to the Technology sector at 22.52%. This is followed by Financial Services and Healthcare at 15.87% and 13.22% respectively. Basic Materials (2.35%), Utilities (2.41%), and Real Estate (2.72%) only make up 7.48% of the fund’s total assets.
QUAL’s mid-section with moderate exposure is comprised of Consumer Defensive, Industrials, Consumer Cyclical, Communication Services, and Healthcare stocks at 8.57%, 9.22%, 9.43%, 11.44%, and 13.22%.
VO is 0.51% less exposed to the Technology sector than QUAL (22.01% vs 22.52%). VO’s exposure to Healthcare and Consumer Cyclical stocks is 0.19% lower and 2.69% higher respectively (13.03% vs. 13.22% and 12.12% vs. 9.43%). In total, Basic Materials, Energy, and Utilities also make up 5.30% more of the fund’s holdings compared to QUAL (12.30% vs. 7.00%).
|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%.
|Facebook Inc Class A||4.77%|
|Nike Inc Class B||4.05%|
|Johnson & Johnson||2.99%|
|Mastercard Inc Class A||2.72%|
|Alphabet Inc Class A||2.49%|
QUAL’s Top Holdings are Facebook Inc Class A, Nike Inc Class B, Microsoft Corp, Apple Inc, and Johnson & Johnson at 4.77%, 4.05%, 3.54%, 3.52%, and 2.99%.
BlackRock Inc (2.87%), Target Corp (2.8%), and Mastercard Inc Class A (2.72%) have a slightly smaller but still significant weight. NVIDIA Corp and Alphabet Inc Class A are also represented in the QUAL’s holdings at 2.71% and 2.49%.
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The Vanguard Mid-Cap Index Fund ETF Shares (VO) has a Sharpe Ratio of 0.83 with a Mean Return of 1.14 and a Beta of 1.11. Its R-squared is 92.22 while VO’s Standard Deviation is 15.65. Furthermore, the fund has a Alpha of -2.71 and a Treynor Ratio of 11.32.
The iShares MSCI USA Quality Factor ETF (QUAL) has a Beta of 0 with a R-squared of 0 and a Sharpe Ratio of 0. Its Standard Deviation is 0 while QUAL’s Alpha is 0. Furthermore, the fund has a Mean Return of 0 and a Treynor Ratio of 0.
VO’s Mean Return is 1.14 points higher than that of QUAL and its R-squared is 92.22 points higher. With a Standard Deviation of 15.65, VO is slightly more volatile than QUAL. The Alpha and Beta of VO are 2.71 points lower and 1.11 points higher than QUAL’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 QUAL, returning 34.14% on an annual basis. The poorest year for QUAL in the last ten years was 2018, with a yield of -5.77%. Most years the iShares MSCI USA Quality Factor ETF has given investors modest returns, such as in 2010, 2015, and 2016, when gains were 0.0%, 5.56%, and 9.18% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in VO would have resulted in a final balance of $20,938. This is a profit of $10,938 over 7 years and amounts to a compound annual growth rate (CAGR) of 14.34%.
With a $10,000 investment in QUAL, the end total would have been $23,251. This equates to a $13,251 profit over 7 years and a compound annual growth rate (CAGR) of 13.42%.
VO’s CAGR is 0.91 percentage points higher than that of QUAL and as a result, would have yielded $2,313 less on a $10,000 investment. Thus, VO outperformed QUAL by 0.91% annually.
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