VTV vs. IEF: What’s The Difference?

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

The expense ratio of VTV is 0.11 percentage points lower than IEF’s (0.04% vs. 0.15%). VTV also has a high exposure to the financial services sector while IEF is mostly comprised of AAA bonds. Overall, VTV has provided higher returns than IEF over the past ten years.

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

Summary

VTV IEF
Name Vanguard Value Index Fund ETF Shares iShares 7-10 Year Treasury Bond ETF
Category Large Value Long Government
Issuer Vanguard iShares
AUM 125.77B 13.44B
Avg. Return 12.07% 5.06%
Div. Yield 2.15% 0.84%
Expense Ratio 0.04% 0.15%

The Vanguard Value Index Fund ETF Shares (VTV) is a Large Value fund that is issued by Vanguard. It currently has 125.77B total assets under management and has yielded an average annual return of 12.07% over the past 10 years. The fund has a dividend yield of 2.15% with an expense ratio of 0.04%.

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%.

VTV’s dividend yield is 1.31% higher than that of IEF (2.15% vs. 0.84%). Also, VTV yielded on average 7.01% more per year over the past decade (12.07% vs. 5.06%). The expense ratio of VTV is 0.11 percentage points lower than IEF’s (0.04% vs. 0.15%).

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Fund Composition

Holdings

VTV - Holdings

VTV Holdings Weight
Berkshire Hathaway Inc Class B 2.98%
JPMorgan Chase & Co 2.82%
Johnson & Johnson 2.6%
UnitedHealth Group Inc 2.27%
Procter & Gamble Co 1.98%
Bank of America Corp 1.91%
Exxon Mobil Corp 1.6%
Comcast Corp Class A 1.57%
Intel Corp 1.36%
Verizon Communications Inc 1.32%

VTV’s Top Holdings are Berkshire Hathaway Inc Class B, JPMorgan Chase & Co, Johnson & Johnson, UnitedHealth Group Inc, and Procter & Gamble Co at 2.98%, 2.82%, 2.6%, 2.27%, and 1.98%.

Bank of America Corp (1.91%), Exxon Mobil Corp (1.6%), and Comcast Corp Class A (1.57%) have a slightly smaller but still significant weight. Intel Corp and Verizon Communications Inc are also represented in the VTV’s holdings at 1.36% and 1.32%.

IEF - Holdings

IEF Bond Sectors Weight
AAA 100.0%
Others 0.0%
Below B 0.0%
B 0.0%
BB 0.0%
BBB 0.0%
A 0.0%
AA 0.0%
US Government 0.0%

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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Risk Analysis

VTV IEF
Mean Return 1.05 0.32
R-squared 92.61 77.56
Std. Deviation 13.78 5.42
Alpha -1.92 -1.2
Beta 0.98 1.59
Sharpe Ratio 0.87 0.6
Treynor Ratio 11.94 1.97

The Vanguard Value Index Fund ETF Shares (VTV) has a Beta of 0.98 with a Treynor Ratio of 11.94 and a Sharpe Ratio of 0.87. Its Alpha is -1.92 while VTV’s Mean Return is 1.05. Furthermore, the fund has a Standard Deviation of 13.78 and a R-squared of 92.61.

The iShares 7-10 Year Treasury Bond ETF (IEF) has a Alpha of -1.2 with a Standard Deviation of 5.42 and a Treynor Ratio of 1.97. Its Beta is 1.59 while IEF’s R-squared is 77.56. Furthermore, the fund has a Sharpe Ratio of 0.6 and a Mean Return of 0.32.

VTV’s Mean Return is 0.73 points higher than that of IEF and its R-squared is 15.05 points higher. With a Standard Deviation of 13.78, VTV is slightly more volatile than IEF. The Alpha and Beta of VTV are 0.72 points lower and 0.61 points lower than IEF’s Alpha and Beta.

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Performance

Annual Returns

VTV vs. IEF - Annual Returns

Year VTV IEF
2020 2.23% 9.84%
2019 25.85% 8.38%
2018 -5.39% 0.82%
2017 17.12% 2.47%
2016 16.88% 1.0%
2015 -0.89% 1.55%
2014 13.19% 8.92%
2013 33.03% -6.12%
2012 15.19% 4.06%
2011 1.16% 15.46%
2010 14.45% 9.29%

VTV had its best year in 2013 with an annual return of 33.03%. VTV’s worst year over the past decade yielded -5.39% and occurred in 2018. In most years the Vanguard Value Index Fund ETF Shares provided moderate returns such as in 2014, 2010, and 2012 where annual returns amounted to 13.19%, 14.45%, and 15.19% 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

VTV vs. IEF - Portfolio Growth

Fund Initial Balance Final Balance CAGR
VTV $10,000 $33,163 12.07%
IEF $10,000 $16,936 5.06%

A $10,000 investment in VTV would have resulted in a final balance of $33,163. This is a profit of $23,163 over 11 years and amounts to a compound annual growth rate (CAGR) of 12.07%.

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%.

VTV’s CAGR is 7.01 percentage points higher than that of IEF and as a result, would have yielded $16,227 more on a $10,000 investment. Thus, VTV outperformed IEF by 7.01% annually.


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