The Vanguard Growth Index Fund ETF Shares (VUG) and the iShares MBS ETF (MBB) are both among the Top 100 ETFs. VUG is a Vanguard Large Growth fund and MBB is a iShares Intermediate Government fund. So, what’s the difference between VUG and MBB? And which fund is better?
The expense ratio of VUG is 0.02 percentage points lower than MBB’s (0.04% vs. 0.06%). VUG also has a high exposure to the technology sector while MBB is mostly comprised of AAA bonds. Overall, VUG has provided higher returns than MBB over the past ten years.
In this article, we’ll compare VUG vs. MBB. We’ll look at performance and fund composition, as well as at their holdings and portfolio growth. Moreover, I’ll also discuss VUG’s and MBB’s risk metrics, annual returns, and industry exposure and examine how these affect their overall returns.
|Name||Vanguard Growth Index Fund ETF Shares||iShares MBS ETF|
|Category||Large Growth||Intermediate Government|
The Vanguard Growth Index Fund ETF Shares (VUG) is a Large Growth fund that is issued by Vanguard. It currently has 165.53B total assets under management and has yielded an average annual return of 17.58% over the past 10 years. The fund has a dividend yield of 0.57% with an expense ratio of 0.04%.
The iShares MBS ETF (MBB) is a Intermediate Government fund that is issued by iShares. It currently has 25.69B total assets under management and has yielded an average annual return of 3.08% over the past 10 years. The fund has a dividend yield of 1.88% with an expense ratio of 0.06%.
VUG’s dividend yield is 1.31% lower than that of MBB (0.57% vs. 1.88%). Also, VUG yielded on average 14.50% more per year over the past decade (17.58% vs. 3.08%). The expense ratio of VUG is 0.02 percentage points lower than MBB’s (0.04% vs. 0.06%).
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|Facebook Inc Class A||3.89%|
|Alphabet Inc Class A||3.43%|
|Alphabet Inc Class C||3.22%|
|Visa Inc Class A||1.78%|
|PayPal Holdings Inc||1.6%|
VUG’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc Class A, and Alphabet Inc Class A at 10.13%, 9.52%, 6.88%, 3.89%, and 3.43%.
Alphabet Inc Class C (3.22%), Tesla Inc (2.44%), and NVIDIA Corp (2.21%) have a slightly smaller but still significant weight. Visa Inc Class A and PayPal Holdings Inc are also represented in the VUG’s holdings at 1.78% and 1.6%.
|MBB Bond Sectors||Weight|
MBB’s Top Bond Sectors are ratings of AAA, Others, Below B, B, and BB at 99.51%, 0.49%, 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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The Vanguard Growth Index Fund ETF Shares (VUG) has a Standard Deviation of 14.76 with a Beta of 1.04 and a Alpha of 1.81. Its Mean Return is 1.44 while VUG’s Treynor Ratio is 16.13. Furthermore, the fund has a Sharpe Ratio of 1.13 and a R-squared of 92.48.
The iShares MBS ETF (MBB) has a Sharpe Ratio of 0.87 with a Beta of 0.6 and a Mean Return of 0.2. Its Standard Deviation is 2.12 while MBB’s Treynor Ratio is 3.02. Furthermore, the fund has a R-squared of 74.38 and a Alpha of 0.14.
VUG’s Mean Return is 1.24 points higher than that of MBB and its R-squared is 18.10 points higher. With a Standard Deviation of 14.76, VUG is slightly more volatile than MBB. The Alpha and Beta of VUG are 1.67 points higher and 0.44 points higher than MBB’s Alpha and Beta.
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VUG had its best year in 2020 with an annual return of 40.16%. VUG’s worst year over the past decade yielded -3.32% and occurred in 2018. In most years the Vanguard Growth Index Fund ETF Shares provided moderate returns such as in 2014, 2012, and 2010 where annual returns amounted to 13.62%, 17.03%, and 17.11% respectively.
The year 2019 was the strongest year for MBB, returning 6.27% on an annual basis. The poorest year for MBB in the last ten years was 2013, with a yield of -1.92%. Most years the iShares MBS ETF has given investors modest returns, such as in 2012, 2017, and 2020, when gains were 2.23%, 2.37%, and 4.03% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in VUG would have resulted in a final balance of $54,735. This is a profit of $44,735 over 11 years and amounts to a compound annual growth rate (CAGR) of 17.58%.
With a $10,000 investment in MBB, the end total would have been $13,906. This equates to a $3,906 profit over 11 years and a compound annual growth rate (CAGR) of 3.08%.
VUG’s CAGR is 14.50 percentage points higher than that of MBB and as a result, would have yielded $40,829 more on a $10,000 investment. Thus, VUG outperformed MBB by 14.50% annually.
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