VUG vs. PFF: What’s The Difference?

The Vanguard Growth Index Fund ETF Shares (VUG) and the iShares Preferred and Income Securities ETF (PFF) are both among the Top 100 ETFs. VUG is a Vanguard Large Growth fund and PFF is a iShares Preferred Stock fund. So, what’s the difference between VUG and PFF? And which fund is better?

The expense ratio of VUG is 0.42 percentage points lower than PFF’s (0.04% vs. 0.46%). VUG also has a higher exposure to the technology sector and a higher standard deviation. Overall, VUG has provided higher returns than PFF over the past ten years.

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

Summary

VUG PFF
Name Vanguard Growth Index Fund ETF Shares iShares Preferred and Income Securities ETF
Category Large Growth Preferred Stock
Issuer Vanguard iShares
AUM 165.53B 19.8B
Avg. Return 17.58% 6.90%
Div. Yield 0.57% 4.47%
Expense Ratio 0.04% 0.46%

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 Preferred and Income Securities ETF (PFF) is a Preferred Stock fund that is issued by iShares. It currently has 19.8B total assets under management and has yielded an average annual return of 6.90% over the past 10 years. The fund has a dividend yield of 4.47% with an expense ratio of 0.46%.

VUG’s dividend yield is 3.90% lower than that of PFF (0.57% vs. 4.47%). Also, VUG yielded on average 10.68% more per year over the past decade (17.58% vs. 6.90%). The expense ratio of VUG is 0.42 percentage points lower than PFF’s (0.04% vs. 0.46%).

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Fund Composition

Industry Exposure

VUG vs. PFF - Industry Exposure

VUG PFF
Technology 39.05% 0.0%
Industrials 5.13% 10.27%
Energy 0.32% 0.0%
Communication Services 16.49% 0.0%
Utilities 0.0% 81.81%
Healthcare 8.09% 3.54%
Consumer Defensive 2.41% 0.0%
Real Estate 2.46% 0.65%
Financial Services 6.75% 0.0%
Consumer Cyclical 17.78% 0.0%
Basic Materials 1.52% 3.74%

The Vanguard Growth Index Fund ETF Shares (VUG) has the most exposure to the Technology sector at 39.05%. This is followed by Consumer Cyclical and Communication Services at 17.78% and 16.49% respectively. Energy (0.32%), Basic Materials (1.52%), and Consumer Defensive (2.41%) only make up 4.25% of the fund’s total assets.

VUG’s mid-section with moderate exposure is comprised of Real Estate, Industrials, Financial Services, Healthcare, and Communication Services stocks at 2.46%, 5.13%, 6.75%, 8.09%, and 16.49%.

The iShares Preferred and Income Securities ETF (PFF) has the most exposure to the Utilities sector at 81.81%. This is followed by Industrials and Basic Materials at 10.27% and 3.74% respectively. Financial Services (0.0%), Consumer Defensive (0.0%), and Communication Services (0.0%) only make up 0.00% of the fund’s total assets.

PFF’s mid-section with moderate exposure is comprised of Energy, Technology, Real Estate, Healthcare, and Basic Materials stocks at 0.0%, 0.0%, 0.65%, 3.54%, and 3.74%.

VUG is 39.05% more exposed to the Technology sector than PFF (39.05% vs 0.0%). VUG’s exposure to Consumer Cyclical and Communication Services stocks is 17.78% higher and 16.49% higher respectively (17.78% vs. 0.0% and 16.49% vs. 0.0%). In total, Energy, Basic Materials, and Consumer Defensive also make up 0.51% more of the fund’s holdings compared to PFF (4.25% vs. 3.74%).

Holdings

VUG - Holdings

VUG Holdings Weight
Apple Inc 10.13%
Microsoft Corp 9.52%
Amazon.com Inc 6.88%
Facebook Inc Class A 3.89%
Alphabet Inc Class A 3.43%
Alphabet Inc Class C 3.22%
Tesla Inc 2.44%
NVIDIA Corp 2.21%
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%.

PFF - Holdings

PFF Holdings Weight
Broadcom Inc Broadcom Inc 8 % Mandatory Convertible Preferred Stock Ser A 2.54%
BlackRock Cash Funds Treasury SL Agency 2.3%
Wells Fargo & Co 7 1/2 % Non Cum Perp Conv Pfd Shs -A- Series -L- 1.79%
Bank of America Corp 7 1/4 % Non-Cum Perp Conv Pfd Shs Series -L- 1.49%
ArcelorMittal S.A. 5.5% 1.36%
Danaher Corp PRF CONVERT 15/04/2022 USD – Ser A 1.35%
Danaher Corp 5% PRF PERPETUAL USD 1000 – Ser B 1.14%
NextEra Energy Inc Unit 1.12%
Citigroup Capital XIII Floating Rate Trust Pfd Secs Registered 2010-30.10.4 1.08%
Avantor Inc Ser A 0.99%

PFF’s Top Holdings are Broadcom Inc Broadcom Inc 8 % Mandatory Convertible Preferred Stock Ser A, BlackRock Cash Funds Treasury SL Agency, Wells Fargo & Co 7 1/2 % Non Cum Perp Conv Pfd Shs -A- Series -L-, Bank of America Corp 7 1/4 % Non-Cum Perp Conv Pfd Shs Series -L-, and ArcelorMittal S.A. 5.5% at 2.54%, 2.3%, 1.79%, 1.49%, and 1.36%.

Danaher Corp PRF CONVERT 15/04/2022 USD – Ser A (1.35%), Danaher Corp 5% PRF PERPETUAL USD 1000 – Ser B (1.14%), and NextEra Energy Inc Unit (1.12%) have a slightly smaller but still significant weight. Citigroup Capital XIII Floating Rate Trust Pfd Secs Registered 2010-30.10.4 and Avantor Inc Ser A are also represented in the PFF’s holdings at 1.08% and 0.99%.

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Risk Analysis

VUG PFF
Mean Return 1.44 0.52
R-squared 92.48 9.39
Std. Deviation 14.76 7.87
Alpha 1.81 3.45
Beta 1.04 0.81
Sharpe Ratio 1.13 0.72
Treynor Ratio 16.13 6.79

The Vanguard Growth Index Fund ETF Shares (VUG) has a R-squared of 92.48 with a Mean Return of 1.44 and a Treynor Ratio of 16.13. Its Standard Deviation is 14.76 while VUG’s Sharpe Ratio is 1.13. Furthermore, the fund has a Alpha of 1.81 and a Beta of 1.04.

The iShares Preferred and Income Securities ETF (PFF) has a Treynor Ratio of 6.79 with a Sharpe Ratio of 0.72 and a R-squared of 9.39. Its Mean Return is 0.52 while PFF’s Standard Deviation is 7.87. Furthermore, the fund has a Beta of 0.81 and a Alpha of 3.45.

VUG’s Mean Return is 0.92 points higher than that of PFF and its R-squared is 83.09 points higher. With a Standard Deviation of 14.76, VUG is slightly more volatile than PFF. The Alpha and Beta of VUG are 1.64 points lower and 0.23 points higher than PFF’s Alpha and Beta.

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Performance

Annual Returns

VUG vs. PFF - Annual Returns

Year VUG PFF
2020 40.16% 7.94%
2019 37.26% 15.62%
2018 -3.32% -4.77%
2017 27.8% 8.33%
2016 6.13% 1.26%
2015 3.32% 4.62%
2014 13.62% 13.45%
2013 32.38% -0.59%
2012 17.03% 18.25%
2011 1.87% -2.2%
2010 17.11% 13.96%

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 2012 was the strongest year for PFF, returning 18.25% on an annual basis. The poorest year for PFF in the last ten years was 2018, with a yield of -4.77%. Most years the iShares Preferred and Income Securities ETF has given investors modest returns, such as in 2015, 2020, and 2017, when gains were 4.62%, 7.94%, and 8.33% respectively.

Portfolio Growth

VUG vs. PFF - Portfolio Growth

Fund Initial Balance Final Balance CAGR
VUG $10,000 $54,735 17.58%
PFF $10,000 $20,272 6.90%

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 PFF, the end total would have been $20,272. This equates to a $10,272 profit over 11 years and a compound annual growth rate (CAGR) of 6.90%.

VUG’s CAGR is 10.68 percentage points higher than that of PFF and as a result, would have yielded $34,463 more on a $10,000 investment. Thus, VUG outperformed PFF by 10.68% annually.


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