VUG vs. VHT: What’s The Difference?

The Vanguard Growth Index Fund ETF Shares (VUG) and the Vanguard Health Care Index Fund ETF Shares (VHT) are both among the Top 100 ETFs. VUG is a Vanguard Large Growth fund and VHT is a Vanguard Health fund. So, what’s the difference between VUG and VHT? And which fund is better?

The expense ratio of VUG is 0.06 percentage points lower than VHT’s (0.04% vs. 0.1%). VUG also has a higher exposure to the technology sector and a higher standard deviation. Overall, VUG has provided higher returns than VHT over the past ten years.

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

Summary

VUG VHT
Name Vanguard Growth Index Fund ETF Shares Vanguard Health Care Index Fund ETF Shares
Category Large Growth Health
Issuer Vanguard Vanguard
AUM 165.53B 17.94B
Avg. Return 17.58% 16.04%
Div. Yield 0.57% 1.15%
Expense Ratio 0.04% 0.1%

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 Vanguard Health Care Index Fund ETF Shares (VHT) is a Health fund that is issued by Vanguard. It currently has 17.94B total assets under management and has yielded an average annual return of 16.04% over the past 10 years. The fund has a dividend yield of 1.15% with an expense ratio of 0.1%.

VUG’s dividend yield is 0.58% lower than that of VHT (0.57% vs. 1.15%). Also, VUG yielded on average 1.54% more per year over the past decade (17.58% vs. 16.04%). The expense ratio of VUG is 0.06 percentage points lower than VHT’s (0.04% vs. 0.1%).

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Fund Composition

Industry Exposure

VUG vs. VHT - Industry Exposure

VUG VHT
Technology 39.05% 0.05%
Industrials 5.13% 0.05%
Energy 0.32% 0.0%
Communication Services 16.49% 0.0%
Utilities 0.0% 0.0%
Healthcare 8.09% 99.57%
Consumer Defensive 2.41% 0.0%
Real Estate 2.46% 0.0%
Financial Services 6.75% 0.02%
Consumer Cyclical 17.78% 0.0%
Basic Materials 1.52% 0.31%

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 Vanguard Health Care Index Fund ETF Shares (VHT) has the most exposure to the Healthcare sector at 99.57%. This is followed by Basic Materials and Technology at 0.31% and 0.05% respectively. Real Estate (0.0%), Consumer Defensive (0.0%), and Utilities (0.0%) only make up 0.00% of the fund’s total assets.

VHT’s mid-section with moderate exposure is comprised of Communication Services, Energy, Financial Services, Industrials, and Technology stocks at 0.0%, 0.0%, 0.02%, 0.05%, and 0.05%.

VUG is 39.00% more exposed to the Technology sector than VHT (39.05% vs 0.05%). 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 3.94% more of the fund’s holdings compared to VHT (4.25% vs. 0.31%).

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%.

VHT - Holdings

VHT Holdings Weight
Johnson & Johnson 7.34%
UnitedHealth Group Inc 6.44%
Pfizer Inc 3.7%
Abbott Laboratories 3.48%
Thermo Fisher Scientific Inc 3.37%
AbbVie Inc 3.37%
Merck & Co Inc 3.33%
Eli Lilly and Co 3.17%
Danaher Corp 2.91%
Medtronic PLC 2.83%

VHT’s Top Holdings are Johnson & Johnson, UnitedHealth Group Inc, Pfizer Inc, Abbott Laboratories, and Thermo Fisher Scientific Inc at 7.34%, 6.44%, 3.7%, 3.48%, and 3.37%.

AbbVie Inc (3.37%), Merck & Co Inc (3.33%), and Eli Lilly and Co (3.17%) have a slightly smaller but still significant weight. Danaher Corp and Medtronic PLC are also represented in the VHT’s holdings at 2.91% and 2.83%.

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Risk Analysis

VUG VHT
Mean Return 1.44 1.33
R-squared 92.48 59.86
Std. Deviation 14.76 13.58
Alpha 1.81 7.99
Beta 1.04 0.75
Sharpe Ratio 1.13 1.13
Treynor Ratio 16.13 20.74

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

The Vanguard Health Care Index Fund ETF Shares (VHT) has a Treynor Ratio of 20.74 with a R-squared of 59.86 and a Beta of 0.75. Its Sharpe Ratio is 1.13 while VHT’s Standard Deviation is 13.58. Furthermore, the fund has a Mean Return of 1.33 and a Alpha of 7.99.

VUG’s Mean Return is 0.11 points higher than that of VHT and its R-squared is 32.62 points higher. With a Standard Deviation of 14.76, VUG is slightly more volatile than VHT. The Alpha and Beta of VUG are 6.18 points lower and 0.29 points higher than VHT’s Alpha and Beta.

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Performance

Annual Returns

VUG vs. VHT - Annual Returns

Year VUG VHT
2020 40.16% 18.21%
2019 37.26% 21.97%
2018 -3.32% 5.55%
2017 27.8% 23.34%
2016 6.13% -3.33%
2015 3.32% 7.22%
2014 13.62% 25.38%
2013 32.38% 42.67%
2012 17.03% 19.1%
2011 1.87% 10.57%
2010 17.11% 5.75%

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 2013 was the strongest year for VHT, returning 42.67% on an annual basis. The poorest year for VHT in the last ten years was 2016, with a yield of -3.33%. Most years the Vanguard Health Care Index Fund ETF Shares has given investors modest returns, such as in 2011, 2020, and 2012, when gains were 10.57%, 18.21%, and 19.1% respectively.

Portfolio Growth

VUG vs. VHT - Portfolio Growth

Fund Initial Balance Final Balance CAGR
VUG $10,000 $54,735 17.58%
VHT $10,000 $48,464 16.04%

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 VHT, the end total would have been $48,464. This equates to a $38,464 profit over 11 years and a compound annual growth rate (CAGR) of 16.04%.

VUG’s CAGR is 1.54 percentage points higher than that of VHT and as a result, would have yielded $6,271 more on a $10,000 investment. Thus, VUG outperformed VHT by 1.54% annually.


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