The iShares Core U.S. Aggregate Bond ETF (AGG) and the iShares MSCI USA Momentum Factor ETF (MTUM) are both among the Top 100 ETFs. AGG is a iShares Intermediate-Term Bond fund and MTUM is a iShares Large Growth fund. So, what’s the difference between AGG and MTUM? And which fund is better?
The expense ratio of AGG is 0.11 percentage points lower than MTUM’s (0.04% vs. 0.15%). AGG is mostly comprised of AAA bonds while MTUM has a high exposure to the financial services sector. Overall, AGG has provided lower returns than MTUM over the past ten years.
In this article, we’ll compare AGG vs. MTUM. We’ll look at annual returns and holdings, as well as at their fund composition and risk metrics. Moreover, I’ll also discuss AGG’s and MTUM’s industry exposure, portfolio growth, and performance and examine how these affect their overall returns.
|Name||iShares Core U.S. Aggregate Bond ETF||iShares MSCI USA Momentum Factor ETF|
|Category||Intermediate-Term Bond||Large Growth|
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 MSCI USA Momentum Factor ETF (MTUM) is a Large Growth fund that is issued by iShares. It currently has 14.53B total assets under management and has yielded an average annual return of 17.37% over the past 10 years. The fund has a dividend yield of 0.44% with an expense ratio of 0.15%.
AGG’s dividend yield is 1.51% higher than that of MTUM (1.95% vs. 0.44%). Also, AGG yielded on average 13.33% less per year over the past decade (4.04% vs. 17.37%). The expense ratio of AGG is 0.11 percentage points lower than MTUM’s (0.04% vs. 0.15%).
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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.
|The Walt Disney Co||4.39%|
|JPMorgan Chase & Co||4.35%|
|Berkshire Hathaway Inc Class B||4.34%|
|Bank of America Corp||3.81%|
|PayPal Holdings Inc||3.76%|
|Wells Fargo & Co||3.05%|
|Applied Materials Inc||3.05%|
|Alphabet Inc Class C||2.84%|
MTUM’s Top Holdings are Tesla Inc, The Walt Disney Co, JPMorgan Chase & Co, Berkshire Hathaway Inc Class B, and Bank of America Corp at 5.63%, 4.39%, 4.35%, 4.34%, and 3.81%.
PayPal Holdings Inc (3.76%), Wells Fargo & Co (3.05%), and Applied Materials Inc (3.05%) have a slightly smaller but still significant weight. Moderna Inc and Alphabet Inc Class C are also represented in the MTUM’s holdings at 2.89% and 2.84%.
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The iShares Core U.S. Aggregate Bond ETF (AGG) has a Sharpe Ratio of 0.9 with a Mean Return of 0.28 and a Standard Deviation of 3.03. Its Alpha is -0.08 while AGG’s R-squared is 99.96. Furthermore, the fund has a Treynor Ratio of 2.7 and a Beta of 1.01.
The iShares MSCI USA Momentum Factor ETF (MTUM) has a Standard Deviation of 0 with a Mean Return of 0 and a R-squared of 0. Its Alpha is 0 while MTUM’s Sharpe Ratio is 0. Furthermore, the fund has a Treynor Ratio of 0 and a Beta of 0.
AGG’s Mean Return is 0.28 points higher than that of MTUM and its R-squared is 99.96 points higher. With a Standard Deviation of 3.03, AGG is slightly more volatile than MTUM. The Alpha and Beta of AGG are 0.08 points lower and 1.01 points higher than MTUM’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 2017 was the strongest year for MTUM, returning 37.6% on an annual basis. The poorest year for MTUM in the last ten years was 2018, with a yield of -1.77%. Most years the iShares MSCI USA Momentum Factor ETF has given investors modest returns, such as in 2010, 2016, and 2015, when gains were 0.0%, 4.89%, and 9.12% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in AGG would have resulted in a final balance of $13,201. This is a profit of $3,201 over 7 years and amounts to a compound annual growth rate (CAGR) of 4.04%.
With a $10,000 investment in MTUM, the end total would have been $29,301. This equates to a $19,301 profit over 7 years and a compound annual growth rate (CAGR) of 17.37%.
AGG’s CAGR is 13.33 percentage points lower than that of MTUM and as a result, would have yielded $16,100 less on a $10,000 investment. Thus, AGG performed worse than MTUM by 13.33% annually.
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