The Vanguard Total Stock Market Index Fund ETF Shares (VTI) and the Vanguard Mortgage-Backed Securities Index Fund ETF Shares (VMBS) are both among the Top 100 ETFs. VTI is a Vanguard Large Blend fund and VMBS is a Vanguard Intermediate Government fund. So, what’s the difference between VTI and VMBS? And which fund is better?
The expense ratio of VTI is 0.02 percentage points lower than VMBS’s (0.03% vs. 0.05%). VTI also has a high exposure to the technology sector while VMBS is mostly comprised of AAA bonds. Overall, VTI has provided higher returns than VMBS over the past ten years.
In this article, we’ll compare VTI vs. VMBS. We’ll look at annual returns and holdings, as well as at their performance and industry exposure. Moreover, I’ll also discuss VTI’s and VMBS’s fund composition, risk metrics, and portfolio growth and examine how these affect their overall returns.
|Name||Vanguard Total Stock Market Index Fund ETF Shares||Vanguard Mortgage-Backed Securities Index Fund ETF Shares|
|Category||Large Blend||Intermediate Government|
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 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%.
VTI’s dividend yield is 0.03% higher than that of VMBS (1.26% vs. 1.23%). Also, VTI yielded on average 11.80% more per year over the past decade (14.70% vs. 2.89%). The expense ratio of VTI is 0.02 percentage points lower than VMBS’s (0.03% vs. 0.05%).
|Facebook Inc Class A||1.88%|
|Alphabet Inc Class A||1.66%|
|Alphabet Inc Class C||1.56%|
|Berkshire Hathaway Inc Class B||1.09%|
|JPMorgan Chase & Co||1.06%|
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%.
|VMBS Bond Sectors||Weight|
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.
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 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.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in VTI would have resulted in a final balance of $36,370. This is a profit of $26,370 over 10 years and amounts to a compound annual growth rate (CAGR) of 14.70%.
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%.
VTI’s CAGR is 11.80 percentage points higher than that of VMBS and as a result, would have yielded $23,105 more on a $10,000 investment. Thus, VTI outperformed VMBS by 11.80% annually.
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