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VO vs. TLT: What’s The Difference?

The Vanguard Mid-Cap Index Fund ETF Shares (VO) and the iShares 20+ Year Treasury Bond ETF (TLT) are both among the Top 100 ETFs. VO is a Vanguard Mid-Cap Blend fund and TLT is a iShares Long Government fund. So, what’s the difference between VO and TLT? And which fund is better?

The expense ratio of VO is 0.11 percentage points lower than TLT’s (0.04% vs. 0.15%). VO also has a high exposure to the technology sector while TLT is mostly comprised of AAA bonds. Overall, VO has provided higher returns than TLT over the past ten years.

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

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Summary

VOTLT
NameVanguard Mid-Cap Index Fund ETF SharesiShares 20+ Year Treasury Bond ETF
CategoryMid-Cap BlendLong Government
IssuerVanguardiShares
AUM154.08B15.15B
Avg. Return14.34%9.00%
Div. Yield1.23%1.5%
Expense Ratio0.04%0.15%

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 20+ Year Treasury Bond ETF (TLT) is a Long Government fund that is issued by iShares. It currently has 15.15B total assets under management and has yielded an average annual return of 9.00% over the past 10 years. The fund has a dividend yield of 1.5% with an expense ratio of 0.15%.

VO’s dividend yield is 0.27% lower than that of TLT (1.23% vs. 1.5%). Also, VO yielded on average 5.34% more per year over the past decade (14.34% vs. 9.00%). The expense ratio of VO is 0.11 percentage points lower than TLT’s (0.04% vs. 0.15%).

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Fund Composition

Holdings

VO - Holdings

VO HoldingsWeight
IDEXX Laboratories Inc0.78%
DocuSign Inc0.75%
Marvell Technology Inc0.68%
IQVIA Holdings Inc0.68%
Chipotle Mexican Grill Inc0.63%
Veeva Systems Inc Class A0.62%
Digital Realty Trust Inc0.62%
Centene Corp0.62%
Aptiv PLC0.62%
Carrier Global Corp Ordinary Shares0.61%

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%.

TLT - Holdings

TLT Bond SectorsWeight
AAA100.0%
Others0.0%
Below B0.0%
B0.0%
BB0.0%
BBB0.0%
A0.0%
AA0.0%
US Government0.0%

TLT’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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Risk Analysis

VOTLT
Mean Return1.140.63
R-squared92.2268.76
Std. Deviation15.6512.76
Alpha-2.71-2.83
Beta1.113.54
Sharpe Ratio0.830.55
Treynor Ratio11.321.82

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 Mean Return of 1.14. Its Treynor Ratio is 11.32 while VO’s R-squared is 92.22. Furthermore, the fund has a Alpha of -2.71 and a Beta of 1.11.

The iShares 20+ Year Treasury Bond ETF (TLT) has a R-squared of 68.76 with a Mean Return of 0.63 and a Treynor Ratio of 1.82. Its Beta is 3.54 while TLT’s Sharpe Ratio is 0.55. Furthermore, the fund has a Alpha of -2.83 and a Standard Deviation of 12.76.

VO’s Mean Return is 0.51 points higher than that of TLT and its R-squared is 23.46 points higher. With a Standard Deviation of 15.65, VO is slightly more volatile than TLT. The Alpha and Beta of VO are 0.12 points higher and 2.43 points lower than TLT’s Alpha and Beta.

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Performance

Annual Returns

VO vs. TLT - Annual Returns

YearVOTLT
202018.22%17.92%
201931.04%14.93%
2018-9.21%-2.07%
201719.25%8.92%
201611.23%1.36%
2015-1.34%-1.65%
201413.76%27.35%
201335.15%-13.91%
201215.98%3.25%
2011-1.96%33.6%
201025.57%9.25%

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 TLT, returning 33.6% on an annual basis. The poorest year for TLT in the last ten years was 2013, with a yield of -13.91%. Most years the iShares 20+ Year Treasury Bond ETF has given investors modest returns, such as in 2012, 2017, and 2010, when gains were 3.25%, 8.92%, and 9.25% respectively.

Portfolio Growth

VO vs. TLT - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
VO$10,000$40,40414.34%
TLT$10,000$23,8099.00%

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 TLT, the end total would have been $23,809. This equates to a $13,809 profit over 11 years and a compound annual growth rate (CAGR) of 9.00%.

VO’s CAGR is 5.34 percentage points higher than that of TLT and as a result, would have yielded $16,595 more on a $10,000 investment. Thus, VO outperformed TLT by 5.34% annually.


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