VO vs. USMV: What’s The Difference?

The Vanguard Mid-Cap Index Fund ETF Shares (VO) and the iShares MSCI USA Min Vol Factor ETF (USMV) are both among the Top 100 ETFs. VO is a Vanguard Mid-Cap Blend fund and USMV is a iShares Large Blend fund. So, what’s the difference between VO and USMV? And which fund is better?

The expense ratio of VO is 0.11 percentage points lower than USMV’s (0.04% vs. 0.15%). VO also has a higher exposure to the technology sector and a higher standard deviation. Overall, VO has provided higher returns than USMV over the past ten years.

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

Summary

VO USMV
Name Vanguard Mid-Cap Index Fund ETF Shares iShares MSCI USA Min Vol Factor ETF
Category Mid-Cap Blend Large Blend
Issuer Vanguard iShares
AUM 154.08B 27.6B
Avg. Return 14.34% 13.89%
Div. Yield 1.23% 1.5%
Expense Ratio 0.04% 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 MSCI USA Min Vol Factor ETF (USMV) is a Large Blend fund that is issued by iShares. It currently has 27.6B total assets under management and has yielded an average annual return of 13.89% 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 USMV (1.23% vs. 1.5%). Also, VO yielded on average 0.44% more per year over the past decade (14.34% vs. 13.89%). The expense ratio of VO is 0.11 percentage points lower than USMV’s (0.04% vs. 0.15%).

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Fund Composition

Industry Exposure

VO vs. USMV - Industry Exposure

VO USMV
Technology 22.01% 20.53%
Industrials 11.92% 10.51%
Energy 3.82% 0.21%
Communication Services 5.61% 11.03%
Utilities 5.12% 6.93%
Healthcare 13.03% 18.42%
Consumer Defensive 3.25% 12.82%
Real Estate 8.67% 2.73%
Financial Services 11.08% 9.65%
Consumer Cyclical 12.12% 5.53%
Basic Materials 3.36% 1.65%

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 Min Vol Factor ETF (USMV) has the most exposure to the Technology sector at 20.53%. This is followed by Healthcare and Consumer Defensive at 18.42% and 12.82% respectively. Basic Materials (1.65%), Real Estate (2.73%), and Consumer Cyclical (5.53%) only make up 9.91% of the fund’s total assets.

USMV’s mid-section with moderate exposure is comprised of Utilities, Financial Services, Industrials, Communication Services, and Consumer Defensive stocks at 6.93%, 9.65%, 10.51%, 11.03%, and 12.82%.

VO is 1.48% more exposed to the Technology sector than USMV (22.01% vs 20.53%). VO’s exposure to Healthcare and Consumer Cyclical stocks is 5.39% lower and 6.59% higher respectively (13.03% vs. 18.42% and 12.12% vs. 5.53%). In total, Basic Materials, Energy, and Utilities also make up 3.51% more of the fund’s holdings compared to USMV (12.30% vs. 8.79%).

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%.

USMV - Holdings

USMV Holdings Weight
Eli Lilly and Co 1.64%
Microsoft Corp 1.62%
T-Mobile US Inc 1.51%
Accenture PLC Class A 1.51%
Visa Inc Class A 1.49%
Waste Management Inc 1.45%
Adobe Inc 1.45%
The Kroger Co 1.44%
Johnson & Johnson 1.42%
Gilead Sciences Inc 1.42%

USMV’s Top Holdings are Eli Lilly and Co, Microsoft Corp, T-Mobile US Inc, Accenture PLC Class A, and Visa Inc Class A at 1.64%, 1.62%, 1.51%, 1.51%, and 1.49%.

Waste Management Inc (1.45%), Adobe Inc (1.45%), and The Kroger Co (1.44%) have a slightly smaller but still significant weight. Johnson & Johnson and Gilead Sciences Inc are also represented in the USMV’s holdings at 1.42% and 1.42%.

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Risk Analysis

VO USMV
Mean Return 1.14 0
R-squared 92.22 0
Std. Deviation 15.65 0
Alpha -2.71 0
Beta 1.11 0
Sharpe Ratio 0.83 0
Treynor Ratio 11.32 0

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

The iShares MSCI USA Min Vol Factor ETF (USMV) has a Treynor Ratio of 0 with a Mean Return of 0 and a Sharpe Ratio of 0. Its R-squared is 0 while USMV’s Standard Deviation is 0. Furthermore, the fund has a Beta of 0 and a Alpha of 0.

VO’s Mean Return is 1.14 points higher than that of USMV and its R-squared is 92.22 points higher. With a Standard Deviation of 15.65, VO is slightly more volatile than USMV. The Alpha and Beta of VO are 2.71 points lower and 1.11 points higher than USMV’s Alpha and Beta.

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Performance

Annual Returns

VO vs. USMV - Annual Returns

Year VO USMV
2020 18.22% 5.6%
2019 31.04% 27.77%
2018 -9.21% 1.36%
2017 19.25% 18.97%
2016 11.23% 10.5%
2015 -1.34% 5.5%
2014 13.76% 16.34%
2013 35.15% 25.11%
2012 15.98% 11.04%
2011 -1.96% 0.0%
2010 25.57% 0.0%

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 USMV, returning 27.77% on an annual basis. The poorest year for USMV in the last ten years was 2011, with a yield of 0.0%. Most years the iShares MSCI USA Min Vol Factor ETF has given investors modest returns, such as in 2020, 2016, and 2012, when gains were 5.6%, 10.5%, and 11.04% respectively.

Portfolio Growth

VO vs. USMV - Portfolio Growth

Fund Initial Balance Final Balance CAGR
VO $10,000 $28,298 14.34%
USMV $10,000 $27,607 13.89%

A $10,000 investment in VO would have resulted in a final balance of $28,298. This is a profit of $18,298 over 8 years and amounts to a compound annual growth rate (CAGR) of 14.34%.

With a $10,000 investment in USMV, the end total would have been $27,607. This equates to a $17,607 profit over 8 years and a compound annual growth rate (CAGR) of 13.89%.

VO’s CAGR is 0.44 percentage points higher than that of USMV and as a result, would have yielded $691 more on a $10,000 investment. Thus, VO outperformed USMV by 0.44% annually.


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