The iShares Core U.S. Aggregate Bond ETF (AGG) and the iShares Core S&P Total U.S. Stock Market ETF (ITOT) are both among the Top 100 ETFs. AGG is a iShares Intermediate-Term Bond fund and ITOT is a iShares Large Blend fund. So, what’s the difference between AGG and ITOT? And which fund is better?
The expense ratio of AGG is 0.01 percentage points higher than ITOT’s (0.04% vs. 0.03%). AGG is mostly comprised of AAA bonds while ITOT has a high exposure to the technology sector. Overall, AGG has provided lower returns than ITOT over the past ten years.
In this article, we’ll compare AGG vs. ITOT. We’ll look at performance and holdings, as well as at their industry exposure and fund composition. Moreover, I’ll also discuss AGG’s and ITOT’s risk metrics, annual returns, and portfolio growth and examine how these affect their overall returns.
|Name||iShares Core U.S. Aggregate Bond ETF||iShares Core S&P Total U.S. Stock Market ETF|
|Category||Intermediate-Term Bond||Large Blend|
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 Core S&P Total U.S. Stock Market ETF (ITOT) is a Large Blend fund that is issued by iShares. It currently has 41.97B total assets under management and has yielded an average annual return of 14.59% over the past 10 years. The fund has a dividend yield of 1.2% with an expense ratio of 0.03%.
AGG’s dividend yield is 0.75% higher than that of ITOT (1.95% vs. 1.2%). Also, AGG yielded on average 10.55% less per year over the past decade (4.04% vs. 14.59%). The expense ratio of AGG is 0.01 percentage points higher than ITOT’s (0.04% vs. 0.03%).
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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.
|Facebook Inc Class A||1.89%|
|Alphabet Inc Class A||1.79%|
|Alphabet Inc Class C||1.71%|
|Berkshire Hathaway Inc Class B||1.17%|
|JPMorgan Chase & Co||1.02%|
ITOT’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc Class A, and Alphabet Inc Class A at 5.07%, 4.75%, 3.16%, 1.89%, and 1.79%.
Alphabet Inc Class C (1.71%), Tesla Inc (1.17%), and Berkshire Hathaway Inc Class B (1.17%) have a slightly smaller but still significant weight. NVIDIA Corp and JPMorgan Chase & Co are also represented in the ITOT’s holdings at 1.08% and 1.02%.
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The iShares Core U.S. Aggregate Bond ETF (AGG) has a Beta of 1.01 with a R-squared of 99.96 and a Mean Return of 0.28. Its Alpha is -0.08 while AGG’s Sharpe Ratio is 0.9. Furthermore, the fund has a Treynor Ratio of 2.7 and a Standard Deviation of 3.03.
The iShares Core S&P Total U.S. Stock Market ETF (ITOT) has a Alpha of -0.54 with a Beta of 1.03 and a R-squared of 99.4. Its Standard Deviation is 14.02 while ITOT’s Sharpe Ratio is 1.04. Furthermore, the fund has a Mean Return of 1.27 and a Treynor Ratio of 14.13.
AGG’s Mean Return is 0.99 points lower than that of ITOT and its R-squared is 0.56 points higher. With a Standard Deviation of 3.03, AGG is slightly less volatile than ITOT. The Alpha and Beta of AGG are 0.46 points higher and 0.02 points lower than ITOT’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 ITOT, returning 32.67% on an annual basis. The poorest year for ITOT in the last ten years was 2018, with a yield of -5.27%. Most years the iShares Core S&P Total U.S. Stock Market ETF has given investors modest returns, such as in 2014, 2012, and 2010, when gains were 13.01%, 15.98%, and 16.15% 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 ITOT, the end total would have been $42,310. This equates to a $32,310 profit over 11 years and a compound annual growth rate (CAGR) of 14.59%.
AGG’s CAGR is 10.55 percentage points lower than that of ITOT and as a result, would have yielded $26,942 less on a $10,000 investment. Thus, AGG performed worse than ITOT by 10.55% annually.
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