The Vanguard Growth Index Fund ETF Shares (VUG) and the iShares MSCI USA Quality Factor ETF (QUAL) are both among the Top 100 ETFs. VUG is a Vanguard Large Growth fund and QUAL is a iShares Large Blend fund. So, what’s the difference between VUG and QUAL? And which fund is better?
The expense ratio of VUG is 0.11 percentage points lower than QUAL’s (0.04% vs. 0.15%). VUG also has a higher exposure to the technology sector and a higher standard deviation. Overall, VUG has provided higher returns than QUAL over the past ten years.
In this article, we’ll compare VUG vs. QUAL. We’ll look at risk metrics and portfolio growth, as well as at their performance and fund composition. Moreover, I’ll also discuss VUG’s and QUAL’s industry exposure, annual returns, and holdings and examine how these affect their overall returns.
|Name||Vanguard Growth Index Fund ETF Shares||iShares MSCI USA Quality Factor ETF|
|Category||Large Growth||Large Blend|
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 MSCI USA Quality Factor ETF (QUAL) is a Large Blend fund that is issued by iShares. It currently has 23.93B total assets under management and has yielded an average annual return of 13.42% over the past 10 years. The fund has a dividend yield of 1.29% with an expense ratio of 0.15%.
VUG’s dividend yield is 0.72% lower than that of QUAL (0.57% vs. 1.29%). Also, VUG yielded on average 4.16% more per year over the past decade (17.58% vs. 13.42%). The expense ratio of VUG is 0.11 percentage points lower than QUAL’s (0.04% vs. 0.15%).
FYI: The best way I've found to invest in ETFs is through M1 Finance. It's free and you even get an instant line of credit! Have a look here (link to M1 Finance).
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 MSCI USA Quality Factor ETF (QUAL) has the most exposure to the Technology sector at 22.52%. This is followed by Financial Services and Healthcare at 15.87% and 13.22% respectively. Basic Materials (2.35%), Utilities (2.41%), and Real Estate (2.72%) only make up 7.48% of the fund’s total assets.
QUAL’s mid-section with moderate exposure is comprised of Consumer Defensive, Industrials, Consumer Cyclical, Communication Services, and Healthcare stocks at 8.57%, 9.22%, 9.43%, 11.44%, and 13.22%.
VUG is 16.53% more exposed to the Technology sector than QUAL (39.05% vs 22.52%). VUG’s exposure to Consumer Cyclical and Communication Services stocks is 8.35% higher and 5.05% higher respectively (17.78% vs. 9.43% and 16.49% vs. 11.44%). In total, Energy, Basic Materials, and Consumer Defensive also make up 8.91% less of the fund’s holdings compared to QUAL (4.25% vs. 13.16%).
|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%.
|Facebook Inc Class A||4.77%|
|Nike Inc Class B||4.05%|
|Johnson & Johnson||2.99%|
|Mastercard Inc Class A||2.72%|
|Alphabet Inc Class A||2.49%|
QUAL’s Top Holdings are Facebook Inc Class A, Nike Inc Class B, Microsoft Corp, Apple Inc, and Johnson & Johnson at 4.77%, 4.05%, 3.54%, 3.52%, and 2.99%.
BlackRock Inc (2.87%), Target Corp (2.8%), and Mastercard Inc Class A (2.72%) have a slightly smaller but still significant weight. NVIDIA Corp and Alphabet Inc Class A are also represented in the QUAL’s holdings at 2.71% and 2.49%.
NOTE: The easiest way to add diversification to your portfolio is to invest in real estate through Fundrise. You can become private real estate investor without the burden of property management! Check it out here (link to Fundrise).
The Vanguard Growth Index Fund ETF Shares (VUG) has a R-squared of 92.48 with a Sharpe Ratio of 1.13 and a Standard Deviation of 14.76. Its Beta is 1.04 while VUG’s Treynor Ratio is 16.13. Furthermore, the fund has a Mean Return of 1.44 and a Alpha of 1.81.
The iShares MSCI USA Quality Factor ETF (QUAL) has a Treynor Ratio of 0 with a Alpha of 0 and a Sharpe Ratio of 0. Its Standard Deviation is 0 while QUAL’s R-squared is 0. Furthermore, the fund has a Mean Return of 0 and a Beta of 0.
VUG’s Mean Return is 1.44 points higher than that of QUAL and its R-squared is 92.48 points higher. With a Standard Deviation of 14.76, VUG is slightly more volatile than QUAL. The Alpha and Beta of VUG are 1.81 points higher and 1.04 points higher than QUAL’s Alpha and Beta.
BTW: Uncorrelated crypto assets such as Bitcoin can serve as a hedge and mitigate risk. I've allocated around 5% of my portfolio to crypto assets through Gemini - the simplest and cheapest broker I've found! Click here to read more (link to Gemini).
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 QUAL, returning 34.14% on an annual basis. The poorest year for QUAL in the last ten years was 2018, with a yield of -5.77%. Most years the iShares MSCI USA Quality Factor ETF has given investors modest returns, such as in 2010, 2015, and 2016, when gains were 0.0%, 5.56%, and 9.18% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in VUG would have resulted in a final balance of $29,615. This is a profit of $19,615 over 7 years and amounts to a compound annual growth rate (CAGR) of 17.58%.
With a $10,000 investment in QUAL, the end total would have been $23,251. This equates to a $13,251 profit over 7 years and a compound annual growth rate (CAGR) of 13.42%.
VUG’s CAGR is 4.16 percentage points higher than that of QUAL and as a result, would have yielded $6,364 more on a $10,000 investment. Thus, VUG outperformed QUAL by 4.16% annually.
Over the past years, I have discovered several tools and products that have helped me tremendously on my path to financial freedom:
P.S.: The links below are affiliate links, which means I receive a small commission at no extra cost to you when you sign up for one of the services. Thank you for your support!
1) Take a look at M1 Finance, my favorite broker. I love how easy it is to invest and maintain my portfolio with them. I can set up automatic transfers, rebalance my portfolio with one click and even borrow up to 35% of my assets at super low interest rates!
2) Fundrise is by far the best way I've found to invest in Real Estate. You can diversify your portfolio by investing in their eREITs or even allocate capital to individual properties (without the hassle of managing tenants!).
3) If you are interested in crypto, check out Gemini. I've started allocating a small amount of assets to the growing crypto space and Gemini has just been a breeze to use. Once you register, make sure to also open an Active Trader account to buy crypto at the lowest fees on the market (just 0.03%!).
To see all of my most up-to-date recommendations, check out the Recommended Tools section.