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VTI vs. IEF: What’s The Difference?

The Vanguard Total Stock Market Index Fund ETF Shares (VTI) and the iShares 7-10 Year Treasury Bond ETF (IEF) are both among the Top 100 ETFs. VTI is a Vanguard Large Blend fund and IEF is a iShares Long Government fund. So, what’s the difference between VTI and IEF? And which fund is better?

The expense ratio of VTI is 0.12 percentage points lower than IEF’s (0.03% vs. 0.15%). VTI also has a high exposure to the technology sector while IEF is mostly comprised of AAA bonds. Overall, VTI has provided higher returns than IEF over the past ten years.

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

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Summary

VTIIEF
NameVanguard Total Stock Market Index Fund ETF SharesiShares 7-10 Year Treasury Bond ETF
CategoryLarge BlendLong Government
IssuerVanguardiShares
AUM1.26T13.44B
Avg. Return14.70%5.06%
Div. Yield1.26%0.84%
Expense Ratio0.03%0.15%

The Vanguard Total Stock Market Index Fund ETF Shares (VTI) is a Large Blend fund that is issued by Vanguard. It currently has 1.26T total assets under management and has yielded an average annual return of 14.70% over the past 10 years. The fund has a dividend yield of 1.26% 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%.

VTI’s dividend yield is 0.42% higher than that of IEF (1.26% vs. 0.84%). Also, VTI yielded on average 9.64% more per year over the past decade (14.70% vs. 5.06%). The expense ratio of VTI is 0.12 percentage points lower than IEF’s (0.03% vs. 0.15%).

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Fund Composition

Holdings

VTI - Holdings

VTI HoldingsWeight
Apple Inc4.9%
Microsoft Corp4.6%
Amazon.com Inc3.33%
Facebook Inc Class A1.88%
Alphabet Inc Class A1.66%
Alphabet Inc Class C1.56%
Tesla Inc1.18%
Berkshire Hathaway Inc Class B1.09%
NVIDIA Corp1.07%
JPMorgan Chase & Co1.06%

VTI’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc Class A, and Alphabet Inc Class A at 4.9%, 4.6%, 3.33%, 1.88%, and 1.66%.

Alphabet Inc Class C (1.56%), Tesla Inc (1.18%), and Berkshire Hathaway Inc Class B (1.09%) have a slightly smaller but still significant weight. NVIDIA Corp and JPMorgan Chase & Co are also represented in the VTI’s holdings at 1.07% and 1.06%.

IEF - Holdings

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

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.

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Performance

Annual Returns

VTI vs. IEF - Annual Returns

YearVTIIEF
202020.95%9.84%
201930.8%8.38%
2018-5.13%0.82%
201721.16%2.47%
201612.68%1.0%
20150.4%1.55%
201412.56%8.92%
201333.51%-6.12%
201216.41%4.06%
20111.06%15.46%
201017.26%9.29%

VTI had its best year in 2013 with an annual return of 33.51%. VTI’s worst year over the past decade yielded -5.13% and occurred in 2018. In most years the Vanguard Total Stock Market Index Fund ETF Shares provided moderate returns such as in 2016, 2012, and 2010 where annual returns amounted to 12.68%, 16.41%, and 17.26% 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.

Portfolio Growth

VTI vs. IEF - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
VTI$10,000$42,64814.70%
IEF$10,000$16,9365.06%

A $10,000 investment in VTI would have resulted in a final balance of $42,648. This is a profit of $32,648 over 11 years and amounts to a compound annual growth rate (CAGR) of 14.70%.

With a $10,000 investment in IEF, the end total would have been $16,936. This equates to a $6,936 profit over 11 years and a compound annual growth rate (CAGR) of 5.06%.

VTI’s CAGR is 9.64 percentage points higher than that of IEF and as a result, would have yielded $25,712 more on a $10,000 investment. Thus, VTI outperformed IEF by 9.64% annually.


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