The iShares Core U.S. Aggregate Bond ETF (AGG) and the Invesco S&P 500 Equal Weight ETF (RSP) are both among the Top 100 ETFs. AGG is a iShares Intermediate-Term Bond fund and RSP is a Invesco Large Blend fund. So, what’s the difference between AGG and RSP? And which fund is better?
The expense ratio of AGG is 0.16 percentage points lower than RSP’s (0.04% vs. 0.2%). AGG is mostly comprised of AAA bonds while RSP has a high exposure to the technology sector. Overall, AGG has provided lower returns than RSP over the past ten years.
In this article, we’ll compare AGG vs. RSP. We’ll look at portfolio growth and annual returns, as well as at their fund composition and industry exposure. Moreover, I’ll also discuss AGG’s and RSP’s risk metrics, holdings, and performance and examine how these affect their overall returns.
|Name||iShares Core U.S. Aggregate Bond ETF||Invesco S&P 500 Equal Weight 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 Invesco S&P 500 Equal Weight ETF (RSP) is a Large Blend fund that is issued by Invesco. It currently has 28.62B total assets under management and has yielded an average annual return of 13.79% over the past 10 years. The fund has a dividend yield of 1.31% with an expense ratio of 0.2%.
AGG’s dividend yield is 0.64% higher than that of RSP (1.95% vs. 1.31%). Also, AGG yielded on average 9.75% less per year over the past decade (4.04% vs. 13.79%). The expense ratio of AGG is 0.16 percentage points lower than RSP’s (0.04% vs. 0.2%).
FYI: The best way I've found to invest in ETFs is through M1 Finance. It's free and you even get an instant line of credit! Have a look here (link to M1 Finance).
|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.
|Chipotle Mexican Grill Inc||0.27%|
|Nike Inc Class B||0.25%|
|Monolithic Power Systems Inc||0.25%|
|Enphase Energy Inc||0.25%|
|Advanced Micro Devices Inc||0.25%|
|IDEXX Laboratories Inc||0.24%|
RSP’s Top Holdings are Chipotle Mexican Grill Inc, Nike Inc Class B, MSCI Inc, Monolithic Power Systems Inc, and Enphase Energy Inc at 0.27%, 0.25%, 0.25%, 0.25%, and 0.25%.
Advanced Micro Devices Inc (0.25%), ResMed Inc (0.24%), and PerkinElmer Inc (0.24%) have a slightly smaller but still significant weight. IDEXX Laboratories Inc and Danaher Corp are also represented in the RSP’s holdings at 0.24% and 0.24%.
NOTE: The easiest way to add diversification to your portfolio is to invest in real estate through Fundrise. You can become private real estate investor without the burden of property management! Check it out here (link to Fundrise).
The iShares Core U.S. Aggregate Bond ETF (AGG) has a Alpha of -0.08 with a Standard Deviation of 3.03 and a Mean Return of 0.28. Its Sharpe Ratio is 0.9 while AGG’s Beta is 1.01. Furthermore, the fund has a Treynor Ratio of 2.7 and a R-squared of 99.96.
The Invesco S&P 500 Equal Weight ETF (RSP) has a Treynor Ratio of 12.12 with a Sharpe Ratio of 0.89 and a Mean Return of 1.19. Its Alpha is -2.45 while RSP’s R-squared is 94.47. Furthermore, the fund has a Beta of 1.1 and a Standard Deviation of 15.36.
AGG’s Mean Return is 0.91 points lower than that of RSP and its R-squared is 5.49 points higher. With a Standard Deviation of 3.03, AGG is slightly less volatile than RSP. The Alpha and Beta of AGG are 2.37 points higher and 0.09 points lower than RSP’s Alpha and Beta.
BTW: Uncorrelated crypto assets such as Bitcoin can serve as a hedge and mitigate risk. I've allocated around 5% of my portfolio to crypto assets through Gemini - the simplest and cheapest broker I've found! Click here to read more (link to Gemini).
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 RSP, returning 35.6% on an annual basis. The poorest year for RSP in the last ten years was 2018, with a yield of -7.77%. Most years the Invesco S&P 500 Equal Weight ETF has given investors modest returns, such as in 2014, 2016, and 2012, when gains were 14.02%, 14.34%, and 17.04% 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 RSP, the end total would have been $38,664. This equates to a $28,664 profit over 11 years and a compound annual growth rate (CAGR) of 13.79%.
AGG’s CAGR is 9.75 percentage points lower than that of RSP and as a result, would have yielded $23,296 less on a $10,000 investment. Thus, AGG performed worse than RSP by 9.75% annually.
Over the past years, I have discovered several tools and products that have helped me tremendously on my path to financial freedom:
P.S.: The links below are affiliate links, which means I receive a small commission at no extra cost to you when you sign up for one of the services. Thank you for your support!
1) Take a look at M1 Finance, my favorite broker. I love how easy it is to invest and maintain my portfolio with them. I can set up automatic transfers, rebalance my portfolio with one click and even borrow up to 35% of my assets at super low interest rates!
2) Fundrise is by far the best way I've found to invest in Real Estate. You can diversify your portfolio by investing in their eREITs or even allocate capital to individual properties (without the hassle of managing tenants!).
3) If you are interested in crypto, check out Gemini. I've started allocating a small amount of assets to the growing crypto space and Gemini has just been a breeze to use. Once you register, make sure to also open an Active Trader account to buy crypto at the lowest fees on the market (just 0.03%!).
To see all of my most up-to-date recommendations, check out the Recommended Tools section.