The iShares Core U.S. Aggregate Bond ETF (AGG) and the Dimensional U.S. Core Equity 2 ETF (DFAC) are both among the Top 100 ETFs. AGG is a iShares Intermediate-Term Bond fund and DFAC is a Dimensional Fund Advisors Large Blend fund. So, what’s the difference between AGG and DFAC? And which fund is better?
The expense ratio of AGG is 0.15 percentage points lower than DFAC’s (0.04% vs. 0.19%). AGG is mostly comprised of AAA bonds while DFAC has a high exposure to the technology sector. Overall, AGG has provided lower returns than DFAC over the past ten years.
In this article, we’ll compare AGG vs. DFAC. We’ll look at risk metrics and portfolio growth, as well as at their fund composition and industry exposure. Moreover, I’ll also discuss AGG’s and DFAC’s annual returns, performance, and holdings and examine how these affect their overall returns.
|Name||iShares Core U.S. Aggregate Bond ETF||Dimensional U.S. Core Equity 2 ETF|
|Category||Intermediate-Term Bond||Large Blend|
|Issuer||iShares||Dimensional Fund Advisors|
The iShares Core U.S. Aggregate Bond ETF (AGG) is a Intermediate-Term Bond fund that is issued by iShares. It currently has 88.8B total assets under management and has yielded an average annual return of 4.04% over the past 10 years. The fund has a dividend yield of 1.95% with an expense ratio of 0.04%.
The Dimensional U.S. Core Equity 2 ETF (DFAC) is a Large Blend fund that is issued by Dimensional Fund Advisors. It currently has 13.53B total assets under management and has yielded an average annual return of 13.93% over the past 10 years. The fund has a dividend yield of 1.0% with an expense ratio of 0.19%.
AGG’s dividend yield is 0.95% higher than that of DFAC (1.95% vs. 1.0%). Also, AGG yielded on average 9.89% less per year over the past decade (4.04% vs. 13.93%). The expense ratio of AGG is 0.15 percentage points lower than DFAC’s (0.04% vs. 0.19%).
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|AGG Bond Sectors||Weight|
AGG’s Top Bond Sectors are ratings of AAA, BBB, A, AA, and Others at 68.92%, 15.38%, 11.16%, 2.92%, and 1.63%. The fund is less weighted towards Below B (0.0%), B (0.0%), and BB (0.0%) rated bonds.
|Johnson & Johnson||1.05%|
|Facebook Inc Class A||1.05%|
|JPMorgan Chase & Co||1.0%|
|Alphabet Inc Class C||0.85%|
|Alphabet Inc Class A||0.84%|
|Berkshire Hathaway Inc Class B||0.75%|
|Visa Inc Class A||0.74%|
DFAC’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Johnson & Johnson, and Facebook Inc Class A at 4.7%, 3.81%, 2.39%, 1.05%, and 1.05%.
JPMorgan Chase & Co (1.0%), Alphabet Inc Class C (0.85%), and Alphabet Inc Class A (0.84%) have a slightly smaller but still significant weight. Berkshire Hathaway Inc Class B and Visa Inc Class A are also represented in the DFAC’s holdings at 0.75% and 0.74%.
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The iShares Core U.S. Aggregate Bond ETF (AGG) has a Treynor Ratio of 2.7 with a Alpha of -0.08 and a Standard Deviation of 3.03. Its Sharpe Ratio is 0.9 while AGG’s R-squared is 99.96. Furthermore, the fund has a Beta of 1.01 and a Mean Return of 0.28.
The Dimensional U.S. Core Equity 2 ETF (DFAC) has a Standard Deviation of 15.55 with a Mean Return of 1.19 and a Sharpe Ratio of 0.88. Its R-squared is 95.1 while DFAC’s Alpha is -2.75. Furthermore, the fund has a Beta of 1.12 and a Treynor Ratio of 11.85.
AGG’s Mean Return is 0.91 points lower than that of DFAC and its R-squared is 4.86 points higher. With a Standard Deviation of 3.03, AGG is slightly less volatile than DFAC. The Alpha and Beta of AGG are 2.67 points higher and 0.11 points lower than DFAC’s Alpha and Beta.
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AGG had its best year in 2019 with an annual return of 8.68%. AGG’s worst year over the past decade yielded -2.15% and occurred in 2013. In most years the iShares Core U.S. Aggregate Bond ETF provided moderate returns such as in 2017, 2012, and 2014 where annual returns amounted to 3.53%, 4.04%, and 6.04% respectively.
The year 2013 was the strongest year for DFAC, returning 37.55% on an annual basis. The poorest year for DFAC in the last ten years was 2018, with a yield of -9.43%. Most years the Dimensional U.S. Core Equity 2 ETF has given investors modest returns, such as in 2020, 2016, and 2012, when gains were 15.8%, 16.31%, and 17.93% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in AGG would have resulted in a final balance of $15,368. This is a profit of $5,368 over 11 years and amounts to a compound annual growth rate (CAGR) of 4.04%.
With a $10,000 investment in DFAC, the end total would have been $38,796. This equates to a $28,796 profit over 11 years and a compound annual growth rate (CAGR) of 13.93%.
AGG’s CAGR is 9.89 percentage points lower than that of DFAC and as a result, would have yielded $23,428 less on a $10,000 investment. Thus, AGG performed worse than DFAC by 9.89% annually.
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