The Vanguard Growth Index Fund ETF Shares (VUG) and the iShares 20+ Year Treasury Bond ETF (TLT) are both among the Top 100 ETFs. VUG is a Vanguard Large Growth fund and TLT is a iShares Long Government fund. So, what’s the difference between VUG and TLT? And which fund is better?
The expense ratio of VUG is 0.11 percentage points lower than TLT’s (0.04% vs. 0.15%). VUG also has a high exposure to the technology sector while TLT is mostly comprised of AAA bonds. Overall, VUG has provided higher returns than TLT over the past ten years.
In this article, we’ll compare VUG vs. TLT. We’ll look at performance and risk metrics, as well as at their holdings and annual returns. Moreover, I’ll also discuss VUG’s and TLT’s fund composition, portfolio growth, and industry exposure and examine how these affect their overall returns.
Summary
| VUG | TLT | |
| Name | Vanguard Growth Index Fund ETF Shares | iShares 20+ Year Treasury Bond ETF |
| Category | Large Growth | Long Government |
| Issuer | Vanguard | iShares |
| AUM | 165.53B | 15.15B |
| Avg. Return | 17.58% | 9.00% |
| Div. Yield | 0.57% | 1.5% |
| Expense Ratio | 0.04% | 0.15% |
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 20+ Year Treasury Bond ETF (TLT) is a Long Government fund that is issued by iShares. It currently has 15.15B total assets under management and has yielded an average annual return of 9.00% over the past 10 years. The fund has a dividend yield of 1.5% with an expense ratio of 0.15%.
VUG’s dividend yield is 0.93% lower than that of TLT (0.57% vs. 1.5%). Also, VUG yielded on average 8.58% more per year over the past decade (17.58% vs. 9.00%). The expense ratio of VUG is 0.11 percentage points lower than TLT’s (0.04% vs. 0.15%).
Fund Composition
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%.
| TLT 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% |
TLT’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.
Risk Analysis
| VUG | TLT | |
| Mean Return | 1.44 | 0.63 |
| R-squared | 92.48 | 68.76 |
| Std. Deviation | 14.76 | 12.76 |
| Alpha | 1.81 | -2.83 |
| Beta | 1.04 | 3.54 |
| Sharpe Ratio | 1.13 | 0.55 |
| Treynor Ratio | 16.13 | 1.82 |
The Vanguard Growth Index Fund ETF Shares (VUG) has a Treynor Ratio of 16.13 with a Mean Return of 1.44 and a Sharpe Ratio of 1.13. Its Alpha is 1.81 while VUG’s R-squared is 92.48. Furthermore, the fund has a Standard Deviation of 14.76 and a Beta of 1.04.
The iShares 20+ Year Treasury Bond ETF (TLT) has a Treynor Ratio of 1.82 with a Beta of 3.54 and a R-squared of 68.76. Its Standard Deviation is 12.76 while TLT’s Sharpe Ratio is 0.55. Furthermore, the fund has a Alpha of -2.83 and a Mean Return of 0.63.
VUG’s Mean Return is 0.81 points higher than that of TLT and its R-squared is 23.72 points higher. With a Standard Deviation of 14.76, VUG is slightly more volatile than TLT. The Alpha and Beta of VUG are 4.64 points higher and 2.50 points lower than TLT’s Alpha and Beta.
Performance
Annual Returns
| Year | VUG | TLT |
| 2020 | 40.16% | 17.92% |
| 2019 | 37.26% | 14.93% |
| 2018 | -3.32% | -2.07% |
| 2017 | 27.8% | 8.92% |
| 2016 | 6.13% | 1.36% |
| 2015 | 3.32% | -1.65% |
| 2014 | 13.62% | 27.35% |
| 2013 | 32.38% | -13.91% |
| 2012 | 17.03% | 3.25% |
| 2011 | 1.87% | 33.6% |
| 2010 | 17.11% | 9.25% |
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 2011 was the strongest year for TLT, returning 33.6% on an annual basis. The poorest year for TLT in the last ten years was 2013, with a yield of -13.91%. Most years the iShares 20+ Year Treasury Bond ETF has given investors modest returns, such as in 2012, 2017, and 2010, when gains were 3.25%, 8.92%, and 9.25% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| VUG | $10,000 | $54,735 | 17.58% |
| TLT | $10,000 | $23,809 | 9.00% |
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 TLT, the end total would have been $23,809. This equates to a $13,809 profit over 11 years and a compound annual growth rate (CAGR) of 9.00%.
VUG’s CAGR is 8.58 percentage points higher than that of TLT and as a result, would have yielded $30,926 more on a $10,000 investment. Thus, VUG outperformed TLT by 8.58% annually.
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