The Vanguard Large-Cap Index Fund ETF Shares (VV) and the Vanguard Mortgage-Backed Securities Index Fund ETF Shares (VMBS) are both among the Top 100 ETFs. VV is a Vanguard Large Blend fund and VMBS is a Vanguard Intermediate Government fund. So, what’s the difference between VV and VMBS? And which fund is better?
The expense ratio of VV is 0.01 percentage points lower than VMBS’s (0.04% vs. 0.05%). VV also has a high exposure to the technology sector while VMBS is mostly comprised of AAA bonds. Overall, VV has provided higher returns than VMBS over the past 10 years.
In this article, we’ll compare VV vs. VMBS. We’ll look at portfolio growth and industry exposure, as well as at their performance and annual returns. Moreover, I’ll also discuss VV’s and VMBS’s fund composition, holdings, and risk metrics and examine how these affect their overall returns.
Summary
| VV | VMBS | |
| Name | Vanguard Large-Cap Index Fund ETF Shares | Vanguard Mortgage-Backed Securities Index Fund ETF Shares |
| Category | Large Blend | Intermediate Government |
| Issuer | Vanguard | Vanguard |
| AUM | 37.65B | 16.61B |
| Avg. Return | 14.75% | 2.89% |
| Div. Yield | 1.26% | 1.23% |
| Expense Ratio | 0.04% | 0.05% |
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 Vanguard Mortgage-Backed Securities Index Fund ETF Shares (VMBS) is a Intermediate Government fund that is issued by Vanguard. It currently has 16.61B total assets under management and has yielded an average annual return of 2.89% over the past 10 years. The fund has a dividend yield of 1.23% with an expense ratio of 0.05%.
VV’s dividend yield is 0.03% higher than that of VMBS (1.26% vs. 1.23%). Also, VV yielded on average 11.85% more per year over the past decade (14.75% vs. 2.89%). The expense ratio of VV is 0.01 percentage points lower than VMBS’s (0.04% vs. 0.05%).
Fund Composition
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%.
| VMBS Bond Sectors | Weight |
| AAA | 100.01% |
| Below B | 0.0% |
| B | 0.0% |
| BB | 0.0% |
| BBB | 0.0% |
| A | 0.0% |
| AA | 0.0% |
| US Government | 0.0% |
| Others | -0.01% |
VMBS’s Top Bond Sectors are ratings of AAA, Below B, B, BB, and BBB at 100.01%, 0.0%, 0.0%, 0.0%, and 0.0%. The fund is less weighted towards A (0.0%), AA (0.0%), and US Government (0.0%) rated bonds.
Risk Analysis
| VV | VMBS | |
| Mean Return | 1.24 | 0.21 |
| R-squared | 99.86 | 65.78 |
| Std. Deviation | 13.75 | 2.02 |
| Alpha | -0.08 | 0.37 |
| Beta | 1.01 | 0.54 |
| Sharpe Ratio | 1.04 | 0.94 |
| Treynor Ratio | 14.14 | 3.47 |
The Vanguard Large-Cap Index Fund ETF Shares (VV) has a Alpha of -0.08 with a Mean Return of 1.24 and a Beta of 1.01. Its Sharpe Ratio is 1.04 while VV’s Standard Deviation is 13.75. Furthermore, the fund has a Treynor Ratio of 14.14 and a R-squared of 99.86.
The Vanguard Mortgage-Backed Securities Index Fund ETF Shares (VMBS) has a Alpha of 0.37 with a Beta of 0.54 and a R-squared of 65.78. Its Standard Deviation is 2.02 while VMBS’s Sharpe Ratio is 0.94. Furthermore, the fund has a Mean Return of 0.21 and a Treynor Ratio of 3.47.
VV’s Mean Return is 1.03 points higher than that of VMBS and its R-squared is 34.08 points higher. With a Standard Deviation of 13.75, VV is slightly more volatile than VMBS. The Alpha and Beta of VV are 0.45 points lower and 0.47 points higher than VMBS’s Alpha and Beta.
Performance
Annual Returns
| Year | VV | VMBS |
| 2020 | 20.99% | 3.77% |
| 2019 | 31.39% | 6.17% |
| 2018 | -4.44% | 0.87% |
| 2017 | 22.03% | 2.37% |
| 2016 | 11.65% | 1.43% |
| 2015 | 1.07% | 1.43% |
| 2014 | 13.39% | 5.81% |
| 2013 | 32.65% | -1.28% |
| 2012 | 16.09% | 2.47% |
| 2011 | 1.58% | 5.89% |
| 2010 | 15.81% | 5.24% |
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 2019 was the strongest year for VMBS, returning 6.17% on an annual basis. The poorest year for VMBS in the last ten years was 2013, with a yield of -1.28%. Most years the Vanguard Mortgage-Backed Securities Index Fund ETF Shares has given investors modest returns, such as in 2017, 2012, and 2020, when gains were 2.37%, 2.47%, and 3.77% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| VV | $10,000 | $37,103 | 14.75% |
| VMBS | $10,000 | $13,265 | 2.89% |
A $10,000 investment in VV would have resulted in a final balance of $37,103. This is a profit of $27,103 over 10 years and amounts to a compound annual growth rate (CAGR) of 14.75%.
With a $10,000 investment in VMBS, the end total would have been $13,265. This equates to a $3,265 profit over 10 years and a compound annual growth rate (CAGR) of 2.89%.
VV’s CAGR is 11.85 percentage points higher than that of VMBS and as a result, would have yielded $23,838 more on a $10,000 investment. Thus, VV outperformed VMBS by 11.85% annually.
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