The iShares Core U.S. Aggregate Bond ETF (AGG) and the iShares 1-5 Year Investment Grade Corporate Bond ETF (IGSB) are both among the Top 100 ETFs. AGG is a iShares Intermediate-Term Bond fund and IGSB is a iShares Short-Term Bond fund. So, what’s the difference between AGG and IGSB? And which fund is better?
The expense ratio of AGG is 0.02 percentage points lower than IGSB’s (0.04% vs. 0.06%). AGG is mostly comprised of AAA bonds and IGSB has a high exposure to BBB bond. Overall, AGG has provided higher returns than IGSB over the past ten years.
In this article, we’ll compare AGG vs. IGSB. We’ll look at annual returns and holdings, as well as at their industry exposure and portfolio growth. Moreover, I’ll also discuss AGG’s and IGSB’s fund composition, performance, and risk metrics and examine how these affect their overall returns.
|Name||iShares Core U.S. Aggregate Bond ETF||iShares 1-5 Year Investment Grade Corporate Bond ETF|
|Category||Intermediate-Term Bond||Short-Term Bond|
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 iShares 1-5 Year Investment Grade Corporate Bond ETF (IGSB) is a Short-Term Bond fund that is issued by iShares. It currently has 26.63B total assets under management and has yielded an average annual return of 2.51% over the past 10 years. The fund has a dividend yield of 2.02% with an expense ratio of 0.06%.
AGG’s dividend yield is 0.07% lower than that of IGSB (1.95% vs. 2.02%). Also, AGG yielded on average 1.53% more per year over the past decade (4.04% vs. 2.51%). The expense ratio of AGG is 0.02 percentage points lower than IGSB’s (0.04% vs. 0.06%).
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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.
|IGSB Bond Sectors||Weight|
IGSB’s Top Bond Sectors are ratings of BBB, A, AA, AAA, and BB at 50.48%, 40.04%, 7.46%, 2.21%, and 0.09%. The fund is less weighted towards Below B (0.0%), B (0.0%), and US Government (0.0%) rated bonds.
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The iShares Core U.S. Aggregate Bond ETF (AGG) has a Standard Deviation of 3.03 with a Mean Return of 0.28 and a Alpha of -0.08. 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 Treynor Ratio of 2.7.
The iShares 1-5 Year Investment Grade Corporate Bond ETF (IGSB) has a Mean Return of 0.19 with a R-squared of 26.13 and a Alpha of 0.69. Its Treynor Ratio is 4.82 while IGSB’s Standard Deviation is 2. Furthermore, the fund has a Beta of 0.34 and a Sharpe Ratio of 0.82.
AGG’s Mean Return is 0.09 points higher than that of IGSB and its R-squared is 73.83 points higher. With a Standard Deviation of 3.03, AGG is slightly more volatile than IGSB. The Alpha and Beta of AGG are 0.77 points lower and 0.67 points higher than IGSB’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 2019 was the strongest year for IGSB, returning 7.01% on an annual basis. The poorest year for IGSB in the last ten years was 2015, with a yield of 0.7%. Most years the iShares 1-5 Year Investment Grade Corporate Bond ETF has given investors modest returns, such as in 2011, 2017, and 2016, when gains were 1.34%, 1.41%, and 1.77% 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 IGSB, the end total would have been $13,103. This equates to a $3,103 profit over 11 years and a compound annual growth rate (CAGR) of 2.51%.
AGG’s CAGR is 1.53 percentage points higher than that of IGSB and as a result, would have yielded $2,265 more on a $10,000 investment. Thus, AGG outperformed IGSB by 1.53% annually.
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