VV vs. TLT: What’s The Difference?

The Vanguard Large-Cap Index Fund ETF Shares (VV) and the iShares 20+ Year Treasury Bond ETF (TLT) are both among the Top 100 ETFs. VV is a Vanguard Large Blend fund and TLT is a iShares Long Government fund. So, what’s the difference between VV and TLT? And which fund is better?

The expense ratio of VV is 0.11 percentage points lower than TLT’s (0.04% vs. 0.15%). VV also has a high exposure to the technology sector while TLT is mostly comprised of AAA bonds. Overall, VV has provided higher returns than TLT over the past 11 years.

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

Summary

VV TLT
Name Vanguard Large-Cap Index Fund ETF Shares iShares 20+ Year Treasury Bond ETF
Category Large Blend Long Government
Issuer Vanguard iShares
AUM 37.65B 15.15B
Avg. Return 14.75% 9.00%
Div. Yield 1.26% 1.5%
Expense Ratio 0.04% 0.15%

The Vanguard Large-Cap Index Fund ETF Shares (VV) is a Large Blend fund that is issued by Vanguard. It currently has 37.65B total assets under management and has yielded an average annual return of 14.75% over the past 10 years. The fund has a dividend yield of 1.26% 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%.

VV’s dividend yield is 0.24% lower than that of TLT (1.26% vs. 1.5%). Also, VV yielded on average 5.75% more per year over the past decade (14.75% vs. 9.00%). The expense ratio of VV is 0.11 percentage points lower than TLT’s (0.04% vs. 0.15%).

Fund Composition

Holdings

VV - Holdings

VV Holdings Weight
Apple Inc 5.7%
Microsoft Corp 5.35%
Amazon.com Inc 3.87%
Facebook Inc Class A 2.19%
Alphabet Inc Class A 1.93%
Alphabet Inc Class C 1.81%
Tesla Inc 1.37%
Berkshire Hathaway Inc Class B 1.3%
NVIDIA Corp 1.24%
JPMorgan Chase & Co 1.24%

VV’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc Class A, and Alphabet Inc Class A at 5.7%, 5.35%, 3.87%, 2.19%, and 1.93%.

Alphabet Inc Class C (1.81%), Tesla Inc (1.37%), and Berkshire Hathaway Inc Class B (1.3%) have a slightly smaller but still significant weight. NVIDIA Corp and JPMorgan Chase & Co are also represented in the VV’s holdings at 1.24% and 1.24%.

TLT - Holdings

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

VV TLT
Mean Return 1.24 0.63
R-squared 99.86 68.76
Std. Deviation 13.75 12.76
Alpha -0.08 -2.83
Beta 1.01 3.54
Sharpe Ratio 1.04 0.55
Treynor Ratio 14.14 1.82

The Vanguard Large-Cap Index Fund ETF Shares (VV) has a Alpha of -0.08 with a Mean Return of 1.24 and a Treynor Ratio of 14.14. Its Standard Deviation is 13.75 while VV’s Beta is 1.01. Furthermore, the fund has a Sharpe Ratio of 1.04 and a R-squared of 99.86.

The iShares 20+ Year Treasury Bond ETF (TLT) has a Mean Return of 0.63 with a Sharpe Ratio of 0.55 and a Standard Deviation of 12.76. Its Beta is 3.54 while TLT’s Alpha is -2.83. Furthermore, the fund has a R-squared of 68.76 and a Treynor Ratio of 1.82.

VV’s Mean Return is 0.61 points higher than that of TLT and its R-squared is 31.10 points higher. With a Standard Deviation of 13.75, VV is slightly more volatile than TLT. The Alpha and Beta of VV are 2.75 points higher and 2.53 points lower than TLT’s Alpha and Beta.

Performance

Annual Returns

VV vs. TLT - Annual Returns

Year VV TLT
2020 20.99% 17.92%
2019 31.39% 14.93%
2018 -4.44% -2.07%
2017 22.03% 8.92%
2016 11.65% 1.36%
2015 1.07% -1.65%
2014 13.39% 27.35%
2013 32.65% -13.91%
2012 16.09% 3.25%
2011 1.58% 33.6%
2010 15.81% 9.25%

VV had its best year in 2013 with an annual return of 32.65%. VV’s worst year over the past decade yielded -4.44% and occurred in 2018. In most years the Vanguard Large-Cap Index Fund ETF Shares provided moderate returns such as in 2014, 2010, and 2012 where annual returns amounted to 13.39%, 15.81%, and 16.09% 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

VV vs. TLT - Portfolio Growth

Fund Initial Balance Final Balance CAGR
VV $10,000 $42,970 14.75%
TLT $10,000 $23,809 9.00%

A $10,000 investment in VV would have resulted in a final balance of $42,970. This is a profit of $32,970 over 11 years and amounts to a compound annual growth rate (CAGR) of 14.75%.

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%.

VV’s CAGR is 5.75 percentage points higher than that of TLT and as a result, would have yielded $19,161 more on a $10,000 investment. Thus, VV outperformed TLT by 5.75% annually.


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