The Vanguard Total World Stock Index Fund ETF Shares (VT) and the Vanguard Mortgage-Backed Securities Index Fund ETF Shares (VMBS) are both among the Top 100 ETFs. VT is a Vanguard N/A fund and VMBS is a Vanguard Intermediate Government fund. So, what’s the difference between VT and VMBS? And which fund is better?
The expense ratio of VT is 0.03 percentage points higher than VMBS’s (0.08% vs. 0.05%). VT also has a high exposure to the technology sector while VMBS is mostly comprised of AAA bonds. Overall, VT has provided higher returns than VMBS over the past 10 years.
In this article, we’ll compare VT vs. VMBS. We’ll look at risk metrics and annual returns, as well as at their portfolio growth and fund composition. Moreover, I’ll also discuss VT’s and VMBS’s holdings, performance, and industry exposure and examine how these affect their overall returns.
Summary
| VT | VMBS | |
| Name | Vanguard Total World Stock Index Fund ETF Shares | Vanguard Mortgage-Backed Securities Index Fund ETF Shares |
| Category | N/A | Intermediate Government |
| Issuer | Vanguard | Vanguard |
| AUM | 30.44B | 16.61B |
| Avg. Return | 10.42% | 2.89% |
| Div. Yield | 1.65% | 1.23% |
| Expense Ratio | 0.08% | 0.05% |
The Vanguard Total World Stock Index Fund ETF Shares (VT) is a N/A fund that is issued by Vanguard. It currently has 30.44B total assets under management and has yielded an average annual return of 10.42% over the past 10 years. The fund has a dividend yield of 1.65% with an expense ratio of 0.08%.
The Vanguard Mortgage-Backed Securities Index Fund ETF Shares (VMBS) is a Intermediate Government fund that is issued by Vanguard. It currently has 16.61B total assets under management and has yielded an average annual return of 2.89% over the past 10 years. The fund has a dividend yield of 1.23% with an expense ratio of 0.05%.
VT’s dividend yield is 0.42% higher than that of VMBS (1.65% vs. 1.23%). Also, VT yielded on average 7.52% more per year over the past decade (10.42% vs. 2.89%). The expense ratio of VT is 0.03 percentage points higher than VMBS’s (0.08% vs. 0.05%).
Fund Composition
Holdings
| VT Holdings | Weight |
| Apple Inc | 2.85% |
| Microsoft Corp | 2.71% |
| Amazon.com Inc | 1.98% |
| Facebook Inc Class A | 1.1% |
| Alphabet Inc Class A | 0.97% |
| Alphabet Inc Class C | 0.95% |
| Tesla Inc | 0.7% |
| NVIDIA Corp | 0.64% |
| JPMorgan Chase & Co | 0.62% |
| Tencent Holdings Ltd | 0.6% |
VT’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc Class A, and Alphabet Inc Class A at 2.85%, 2.71%, 1.98%, 1.1%, and 0.97%.
Alphabet Inc Class C (0.95%), Tesla Inc (0.7%), and NVIDIA Corp (0.64%) have a slightly smaller but still significant weight. JPMorgan Chase & Co and Tencent Holdings Ltd are also represented in the VT’s holdings at 0.62% and 0.6%.
| VMBS Bond Sectors | Weight |
| AAA | 100.01% |
| Below B | 0.0% |
| B | 0.0% |
| BB | 0.0% |
| BBB | 0.0% |
| A | 0.0% |
| AA | 0.0% |
| US Government | 0.0% |
| Others | -0.01% |
VMBS’s Top Bond Sectors are ratings of AAA, Below B, B, BB, and BBB at 100.01%, 0.0%, 0.0%, 0.0%, and 0.0%. The fund is less weighted towards A (0.0%), AA (0.0%), and US Government (0.0%) rated bonds.
Risk Analysis
| VT | VMBS | |
| Mean Return | 0.9 | 0.21 |
| R-squared | 99.35 | 65.78 |
| Std. Deviation | 14.19 | 2.02 |
| Alpha | 0.2 | 0.37 |
| Beta | 1.01 | 0.54 |
| Sharpe Ratio | 0.71 | 0.94 |
| Treynor Ratio | 9.5 | 3.47 |
The Vanguard Total World Stock Index Fund ETF Shares (VT) has a R-squared of 99.35 with a Standard Deviation of 14.19 and a Mean Return of 0.9. Its Alpha is 0.2 while VT’s Sharpe Ratio is 0.71. Furthermore, the fund has a Beta of 1.01 and a Treynor Ratio of 9.5.
The Vanguard Mortgage-Backed Securities Index Fund ETF Shares (VMBS) has a Standard Deviation of 2.02 with a R-squared of 65.78 and a Sharpe Ratio of 0.94. Its Treynor Ratio is 3.47 while VMBS’s Beta is 0.54. Furthermore, the fund has a Mean Return of 0.21 and a Alpha of 0.37.
VT’s Mean Return is 0.69 points higher than that of VMBS and its R-squared is 33.57 points higher. With a Standard Deviation of 14.19, VT is slightly more volatile than VMBS. The Alpha and Beta of VT are 0.17 points lower and 0.47 points higher than VMBS’s Alpha and Beta.
Performance
Annual Returns
| Year | VT | VMBS |
| 2020 | 16.74% | 3.77% |
| 2019 | 26.8% | 6.17% |
| 2018 | -9.67% | 0.87% |
| 2017 | 24.19% | 2.37% |
| 2016 | 8.77% | 1.43% |
| 2015 | -1.88% | 1.43% |
| 2014 | 3.97% | 5.81% |
| 2013 | 22.98% | -1.28% |
| 2012 | 17.33% | 2.47% |
| 2011 | -7.71% | 5.89% |
| 2010 | 13.05% | 5.24% |
VT had its best year in 2019 with an annual return of 26.8%. VT’s worst year over the past decade yielded -9.67% and occurred in 2018. In most years the Vanguard Total World Stock Index Fund ETF Shares provided moderate returns such as in 2016, 2010, and 2020 where annual returns amounted to 8.77%, 13.05%, and 16.74% respectively.
The year 2019 was the strongest year for VMBS, returning 6.17% on an annual basis. The poorest year for VMBS in the last ten years was 2013, with a yield of -1.28%. Most years the Vanguard Mortgage-Backed Securities Index Fund ETF Shares has given investors modest returns, such as in 2017, 2012, and 2020, when gains were 2.37%, 2.47%, and 3.77% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| VT | $10,000 | $24,537 | 10.42% |
| VMBS | $10,000 | $13,265 | 2.89% |
A $10,000 investment in VT would have resulted in a final balance of $24,537. This is a profit of $14,537 over 10 years and amounts to a compound annual growth rate (CAGR) of 10.42%.
With a $10,000 investment in VMBS, the end total would have been $13,265. This equates to a $3,265 profit over 10 years and a compound annual growth rate (CAGR) of 2.89%.
VT’s CAGR is 7.52 percentage points higher than that of VMBS and as a result, would have yielded $11,272 more on a $10,000 investment. Thus, VT outperformed VMBS by 7.52% annually.
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