The iShares Core U.S. Aggregate Bond ETF (AGG) and the iShares MSCI USA Quality Factor ETF (QUAL) are both among the Top 100 ETFs. AGG is a iShares Intermediate-Term Bond fund and QUAL is a iShares Large Blend fund. So, what’s the difference between AGG and QUAL? And which fund is better?
The expense ratio of AGG is 0.11 percentage points lower than QUAL’s (0.04% vs. 0.15%). AGG is mostly comprised of AAA bonds while QUAL has a high exposure to the technology sector. Overall, AGG has provided lower returns than QUAL over the past ten years.
In this article, we’ll compare AGG vs. QUAL. We’ll look at portfolio growth and holdings, as well as at their industry exposure and performance. Moreover, I’ll also discuss AGG’s and QUAL’s annual returns, risk metrics, and fund composition and examine how these affect their overall returns.
|Name||iShares Core U.S. Aggregate Bond ETF||iShares MSCI USA Quality Factor 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 MSCI USA Quality Factor ETF (QUAL) is a Large Blend fund that is issued by iShares. It currently has 23.93B total assets under management and has yielded an average annual return of 13.42% over the past 10 years. The fund has a dividend yield of 1.29% with an expense ratio of 0.15%.
AGG’s dividend yield is 0.66% higher than that of QUAL (1.95% vs. 1.29%). Also, AGG yielded on average 9.38% less per year over the past decade (4.04% vs. 13.42%). The expense ratio of AGG is 0.11 percentage points lower than QUAL’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.
|Facebook Inc Class A||4.77%|
|Nike Inc Class B||4.05%|
|Johnson & Johnson||2.99%|
|Mastercard Inc Class A||2.72%|
|Alphabet Inc Class A||2.49%|
QUAL’s Top Holdings are Facebook Inc Class A, Nike Inc Class B, Microsoft Corp, Apple Inc, and Johnson & Johnson at 4.77%, 4.05%, 3.54%, 3.52%, and 2.99%.
BlackRock Inc (2.87%), Target Corp (2.8%), and Mastercard Inc Class A (2.72%) have a slightly smaller but still significant weight. NVIDIA Corp and Alphabet Inc Class A are also represented in the QUAL’s holdings at 2.71% and 2.49%.
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The iShares Core U.S. Aggregate Bond ETF (AGG) has a Treynor Ratio of 2.7 with a Mean Return of 0.28 and a Sharpe Ratio of 0.9. Its Alpha is -0.08 while AGG’s R-squared is 99.96. Furthermore, the fund has a Standard Deviation of 3.03 and a Beta of 1.01.
The iShares MSCI USA Quality Factor ETF (QUAL) has a R-squared of 0 with a Beta of 0 and a Alpha of 0. Its Standard Deviation is 0 while QUAL’s Sharpe Ratio is 0. Furthermore, the fund has a Treynor Ratio of 0 and a Mean Return of 0.
AGG’s Mean Return is 0.28 points higher than that of QUAL and its R-squared is 99.96 points higher. With a Standard Deviation of 3.03, AGG is slightly more volatile than QUAL. The Alpha and Beta of AGG are 0.08 points lower and 1.01 points higher than QUAL’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 QUAL, returning 34.14% on an annual basis. The poorest year for QUAL in the last ten years was 2018, with a yield of -5.77%. Most years the iShares MSCI USA Quality Factor ETF has given investors modest returns, such as in 2010, 2015, and 2016, when gains were 0.0%, 5.56%, and 9.18% 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 QUAL, the end total would have been $23,251. This equates to a $13,251 profit over 7 years and a compound annual growth rate (CAGR) of 13.42%.
AGG’s CAGR is 9.38 percentage points lower than that of QUAL and as a result, would have yielded $10,050 less on a $10,000 investment. Thus, AGG performed worse than QUAL by 9.38% annually.
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