The iShares Core U.S. Aggregate Bond ETF (AGG) and the iShares 1-3 Year Treasury Bond ETF (SHY) are both among the Top 100 ETFs. AGG is a iShares Intermediate-Term Bond fund and SHY is a iShares Short Government fund. So, what’s the difference between AGG and SHY? And which fund is better?
The expense ratio of AGG is 0.11 percentage points lower than SHY’s (0.04% vs. 0.15%). AGG is mostly comprised of AAA bonds and SHY has a high exposure to AAA bond. Overall, AGG has provided higher returns than SHY over the past ten years.
In this article, we’ll compare AGG vs. SHY. We’ll look at fund composition and annual returns, as well as at their risk metrics and performance. Moreover, I’ll also discuss AGG’s and SHY’s industry exposure, holdings, and portfolio growth and examine how these affect their overall returns.
|Name||iShares Core U.S. Aggregate Bond ETF||iShares 1-3 Year Treasury Bond ETF|
|Category||Intermediate-Term Bond||Short 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 1-3 Year Treasury Bond ETF (SHY) is a Short Government fund that is issued by iShares. It currently has 19.51B total assets under management and has yielded an average annual return of 1.27% over the past 10 years. The fund has a dividend yield of 0.46% with an expense ratio of 0.15%.
AGG’s dividend yield is 1.49% higher than that of SHY (1.95% vs. 0.46%). Also, AGG yielded on average 2.77% more per year over the past decade (4.04% vs. 1.27%). The expense ratio of AGG is 0.11 percentage points lower than SHY’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.
|SHY Bond Sectors||Weight|
SHY’s Top Bond Sectors are ratings of AAA, Others, Below B, B, and BB at 99.67%, 0.33%, 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 Standard Deviation of 3.03 with a Sharpe Ratio of 0.9 and a R-squared of 99.96. Its Treynor Ratio is 2.7 while AGG’s Mean Return is 0.28. Furthermore, the fund has a Beta of 1.01 and a Alpha of -0.08.
The iShares 1-3 Year Treasury Bond ETF (SHY) has a Treynor Ratio of 2.6 with a Beta of 0.18 and a Mean Return of 0.09. Its Alpha is -0.03 while SHY’s R-squared is 39.11. Furthermore, the fund has a Sharpe Ratio of 0.54 and a Standard Deviation of 0.89.
AGG’s Mean Return is 0.19 points higher than that of SHY and its R-squared is 60.85 points higher. With a Standard Deviation of 3.03, AGG is slightly more volatile than SHY. The Alpha and Beta of AGG are 0.05 points lower and 0.83 points higher than SHY’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 SHY, returning 3.42% on an annual basis. The poorest year for SHY in the last ten years was 2013, with a yield of 0.23%. Most years the iShares 1-3 Year Treasury Bond ETF has given investors modest returns, such as in 2014, 2016, and 2011, when gains were 0.48%, 0.75%, and 1.43% 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 SHY, the end total would have been $11,486. This equates to a $1,486 profit over 11 years and a compound annual growth rate (CAGR) of 1.27%.
AGG’s CAGR is 2.77 percentage points higher than that of SHY and as a result, would have yielded $3,882 more on a $10,000 investment. Thus, AGG outperformed SHY by 2.77% annually.
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