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VUG vs. USMV: What’s The Difference?

The Vanguard Growth Index Fund ETF Shares (VUG) and the iShares MSCI USA Min Vol Factor ETF (USMV) are both among the Top 100 ETFs. VUG is a Vanguard Large Growth fund and USMV is a iShares Large Blend fund. So, what’s the difference between VUG and USMV? And which fund is better?

The expense ratio of VUG is 0.11 percentage points lower than USMV’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 USMV over the past ten years.

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

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Summary

VUGUSMV
NameVanguard Growth Index Fund ETF SharesiShares MSCI USA Min Vol Factor ETF
CategoryLarge GrowthLarge Blend
IssuerVanguardiShares
AUM165.53B27.6B
Avg. Return17.58%13.89%
Div. Yield0.57%1.5%
Expense Ratio0.04%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 MSCI USA Min Vol Factor ETF (USMV) is a Large Blend fund that is issued by iShares. It currently has 27.6B total assets under management and has yielded an average annual return of 13.89% 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 USMV (0.57% vs. 1.5%). Also, VUG yielded on average 3.68% more per year over the past decade (17.58% vs. 13.89%). The expense ratio of VUG is 0.11 percentage points lower than USMV’s (0.04% vs. 0.15%).

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Fund Composition

Industry Exposure

VUG vs. USMV - Industry Exposure

VUGUSMV
Technology39.05%20.53%
Industrials5.13%10.51%
Energy0.32%0.21%
Communication Services16.49%11.03%
Utilities0.0%6.93%
Healthcare8.09%18.42%
Consumer Defensive2.41%12.82%
Real Estate2.46%2.73%
Financial Services6.75%9.65%
Consumer Cyclical17.78%5.53%
Basic Materials1.52%1.65%

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 Min Vol Factor ETF (USMV) has the most exposure to the Technology sector at 20.53%. This is followed by Healthcare and Consumer Defensive at 18.42% and 12.82% respectively. Basic Materials (1.65%), Real Estate (2.73%), and Consumer Cyclical (5.53%) only make up 9.91% of the fund’s total assets.

USMV’s mid-section with moderate exposure is comprised of Utilities, Financial Services, Industrials, Communication Services, and Consumer Defensive stocks at 6.93%, 9.65%, 10.51%, 11.03%, and 12.82%.

VUG is 18.52% more exposed to the Technology sector than USMV (39.05% vs 20.53%). VUG’s exposure to Consumer Cyclical and Communication Services stocks is 12.25% higher and 5.46% higher respectively (17.78% vs. 5.53% and 16.49% vs. 11.03%). In total, Energy, Basic Materials, and Consumer Defensive also make up 10.43% less of the fund’s holdings compared to USMV (4.25% vs. 14.68%).

Holdings

VUG - Holdings

VUG HoldingsWeight
Apple Inc10.13%
Microsoft Corp9.52%
Amazon.com Inc6.88%
Facebook Inc Class A3.89%
Alphabet Inc Class A3.43%
Alphabet Inc Class C3.22%
Tesla Inc2.44%
NVIDIA Corp2.21%
Visa Inc Class A1.78%
PayPal Holdings Inc1.6%

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%.

USMV - Holdings

USMV HoldingsWeight
Eli Lilly and Co1.64%
Microsoft Corp1.62%
T-Mobile US Inc1.51%
Accenture PLC Class A1.51%
Visa Inc Class A1.49%
Waste Management Inc1.45%
Adobe Inc1.45%
The Kroger Co1.44%
Johnson & Johnson1.42%
Gilead Sciences Inc1.42%

USMV’s Top Holdings are Eli Lilly and Co, Microsoft Corp, T-Mobile US Inc, Accenture PLC Class A, and Visa Inc Class A at 1.64%, 1.62%, 1.51%, 1.51%, and 1.49%.

Waste Management Inc (1.45%), Adobe Inc (1.45%), and The Kroger Co (1.44%) have a slightly smaller but still significant weight. Johnson & Johnson and Gilead Sciences Inc are also represented in the USMV’s holdings at 1.42% and 1.42%.

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Risk Analysis

VUGUSMV
Mean Return1.440
R-squared92.480
Std. Deviation14.760
Alpha1.810
Beta1.040
Sharpe Ratio1.130
Treynor Ratio16.130

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

The iShares MSCI USA Min Vol Factor ETF (USMV) has a R-squared of 0 with a Treynor Ratio of 0 and a Beta of 0. Its Sharpe Ratio is 0 while USMV’s Standard Deviation is 0. Furthermore, the fund has a Mean Return of 0 and a Alpha of 0.

VUG’s Mean Return is 1.44 points higher than that of USMV and its R-squared is 92.48 points higher. With a Standard Deviation of 14.76, VUG is slightly more volatile than USMV. The Alpha and Beta of VUG are 1.81 points higher and 1.04 points higher than USMV’s Alpha and Beta.

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Performance

Annual Returns

VUG vs. USMV - Annual Returns

YearVUGUSMV
202040.16%5.6%
201937.26%27.77%
2018-3.32%1.36%
201727.8%18.97%
20166.13%10.5%
20153.32%5.5%
201413.62%16.34%
201332.38%25.11%
201217.03%11.04%
20111.87%0.0%
201017.11%0.0%

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 USMV, returning 27.77% on an annual basis. The poorest year for USMV in the last ten years was 2011, with a yield of 0.0%. Most years the iShares MSCI USA Min Vol Factor ETF has given investors modest returns, such as in 2020, 2016, and 2012, when gains were 5.6%, 10.5%, and 11.04% respectively.

Portfolio Growth

VUG vs. USMV - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
VUG$10,000$39,20417.58%
USMV$10,000$27,60713.89%

A $10,000 investment in VUG would have resulted in a final balance of $39,204. This is a profit of $29,204 over 8 years and amounts to a compound annual growth rate (CAGR) of 17.58%.

With a $10,000 investment in USMV, the end total would have been $27,607. This equates to a $17,607 profit over 8 years and a compound annual growth rate (CAGR) of 13.89%.

VUG’s CAGR is 3.68 percentage points higher than that of USMV and as a result, would have yielded $11,597 more on a $10,000 investment. Thus, VUG outperformed USMV by 3.68% annually.


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