The Vanguard S&P 500 ETF (VOO) and the iShares 7-10 Year Treasury Bond ETF (IEF) are both among the Top 100 ETFs. VOO is a Vanguard Large Blend fund and IEF is a iShares Long Government fund. So, what’s the difference between VOO and IEF? And which fund is better?
The expense ratio of VOO is 0.12 percentage points lower than IEF’s (0.03% vs. 0.15%). VOO also has a high exposure to the technology sector while IEF is mostly comprised of AAA bonds. Overall, VOO has provided higher returns than IEF over the past ten years.
In this article, we’ll compare VOO vs. IEF. We’ll look at industry exposure and performance, as well as at their annual returns and portfolio growth. Moreover, I’ll also discuss VOO’s and IEF’s fund composition, holdings, and risk metrics and examine how these affect their overall returns.
|Name||Vanguard S&P 500 ETF||iShares 7-10 Year Treasury Bond ETF|
|Category||Large Blend||Long Government|
The Vanguard S&P 500 ETF (VOO) is a Large Blend fund that is issued by Vanguard. It currently has 753.41B total assets under management and has yielded an average annual return of 14.45% over the past 10 years. The fund has a dividend yield of 1.34% with an expense ratio of 0.03%.
The iShares 7-10 Year Treasury Bond ETF (IEF) is a Long Government fund that is issued by iShares. It currently has 13.44B total assets under management and has yielded an average annual return of 5.06% over the past 10 years. The fund has a dividend yield of 0.84% with an expense ratio of 0.15%.
VOO’s dividend yield is 0.50% higher than that of IEF (1.34% vs. 0.84%). Also, VOO yielded on average 9.39% more per year over the past decade (14.45% vs. 5.06%). The expense ratio of VOO is 0.12 percentage points lower than IEF’s (0.03% vs. 0.15%).
|Facebook Inc Class A||2.29%|
|Alphabet Inc Class A||2.02%|
|Alphabet Inc Class C||1.97%|
|Berkshire Hathaway Inc Class B||1.44%|
|JPMorgan Chase & Co||1.3%|
VOO’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc Class A, and Alphabet Inc Class A at 5.92%, 5.62%, 4.06%, 2.29%, and 2.02%.
Alphabet Inc Class C (1.97%), Tesla Inc (1.44%), and Berkshire Hathaway Inc Class B (1.44%) have a slightly smaller but still significant weight. NVIDIA Corp and JPMorgan Chase & Co are also represented in the VOO’s holdings at 1.37% and 1.3%.
|IEF Bond Sectors||Weight|
IEF’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.
VOO had its best year in 2013 with an annual return of 32.33%. VOO’s worst year over the past decade yielded -4.42% and occurred in 2018. In most years the Vanguard S&P 500 ETF provided moderate returns such as in 2016, 2014, and 2012 where annual returns amounted to 11.93%, 13.63%, and 15.98% respectively.
The year 2011 was the strongest year for IEF, returning 15.46% on an annual basis. The poorest year for IEF in the last ten years was 2013, with a yield of -6.12%. Most years the iShares 7-10 Year Treasury Bond ETF has given investors modest returns, such as in 2017, 2012, and 2019, when gains were 2.47%, 4.06%, and 8.38% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in VOO would have resulted in a final balance of $36,575. This is a profit of $26,575 over 10 years and amounts to a compound annual growth rate (CAGR) of 14.45%.
With a $10,000 investment in IEF, the end total would have been $15,497. This equates to a $5,497 profit over 10 years and a compound annual growth rate (CAGR) of 5.06%.
VOO’s CAGR is 9.39 percentage points higher than that of IEF and as a result, would have yielded $21,078 more on a $10,000 investment. Thus, VOO outperformed IEF by 9.39% annually.
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