The iShares Core U.S. Aggregate Bond ETF (AGG) and the iShares MBS ETF (MBB) are both among the Top 100 ETFs. AGG is a iShares Intermediate-Term Bond fund and MBB is a iShares Intermediate Government fund. So, what’s the difference between AGG and MBB? And which fund is better?
The expense ratio of AGG is 0.02 percentage points lower than MBB’s (0.04% vs. 0.06%). AGG is mostly comprised of AAA bonds and MBB has a high exposure to AAA bond. Overall, AGG has provided higher returns than MBB over the past ten years.
In this article, we’ll compare AGG vs. MBB. We’ll look at annual returns and holdings, as well as at their industry exposure and performance. Moreover, I’ll also discuss AGG’s and MBB’s fund composition, risk metrics, and portfolio growth and examine how these affect their overall returns.
|Name||iShares Core U.S. Aggregate Bond ETF||iShares MBS ETF|
|Category||Intermediate-Term Bond||Intermediate Government|
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 MBS ETF (MBB) is a Intermediate Government fund that is issued by iShares. It currently has 25.69B total assets under management and has yielded an average annual return of 3.08% over the past 10 years. The fund has a dividend yield of 1.88% with an expense ratio of 0.06%.
AGG’s dividend yield is 0.07% higher than that of MBB (1.95% vs. 1.88%). Also, AGG yielded on average 0.96% more per year over the past decade (4.04% vs. 3.08%). The expense ratio of AGG is 0.02 percentage points lower than MBB’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.
|MBB Bond Sectors||Weight|
MBB’s Top Bond Sectors are ratings of AAA, Others, Below B, B, and BB at 99.51%, 0.49%, 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.
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The iShares Core U.S. Aggregate Bond ETF (AGG) has a R-squared of 99.96 with a Alpha of -0.08 and a Mean Return of 0.28. Its Sharpe Ratio is 0.9 while AGG’s Standard Deviation is 3.03. Furthermore, the fund has a Treynor Ratio of 2.7 and a Beta of 1.01.
The iShares MBS ETF (MBB) has a Alpha of 0.14 with a Mean Return of 0.2 and a Treynor Ratio of 3.02. Its Sharpe Ratio is 0.87 while MBB’s Standard Deviation is 2.12. Furthermore, the fund has a Beta of 0.6 and a R-squared of 74.38.
AGG’s Mean Return is 0.08 points higher than that of MBB and its R-squared is 25.58 points higher. With a Standard Deviation of 3.03, AGG is slightly more volatile than MBB. The Alpha and Beta of AGG are 0.22 points lower and 0.41 points higher than MBB’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 MBB, returning 6.27% on an annual basis. The poorest year for MBB in the last ten years was 2013, with a yield of -1.92%. Most years the iShares MBS ETF has given investors modest returns, such as in 2012, 2017, and 2020, when gains were 2.23%, 2.37%, and 4.03% 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 MBB, the end total would have been $13,906. This equates to a $3,906 profit over 11 years and a compound annual growth rate (CAGR) of 3.08%.
AGG’s CAGR is 0.96 percentage points higher than that of MBB and as a result, would have yielded $1,462 more on a $10,000 investment. Thus, AGG outperformed MBB by 0.96% annually.
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