AGG vs. VB: What’s The Difference?

The iShares Core U.S. Aggregate Bond ETF (AGG) and the Vanguard Small-Cap Index Fund ETF Shares (VB) are both among the Top 100 ETFs. AGG is a iShares Intermediate-Term Bond fund and VB is a Vanguard Small Blend fund. So, what’s the difference between AGG and VB? And which fund is better?

The expense ratio of AGG is 0.01 percentage points lower than VB’s (0.04% vs. 0.05%). AGG is mostly comprised of AAA bonds while VB has a high exposure to the technology sector. Overall, AGG has provided lower returns than VB over the past ten years.

In this article, we’ll compare AGG vs. VB. We’ll look at risk metrics and industry exposure, as well as at their fund composition and annual returns. Moreover, I’ll also discuss AGG’s and VB’s holdings, portfolio growth, and performance and examine how these affect their overall returns.

Summary

AGG VB
Name iShares Core U.S. Aggregate Bond ETF Vanguard Small-Cap Index Fund ETF Shares
Category Intermediate-Term Bond Small Blend
Issuer iShares Vanguard
AUM 88.8B 137.72B
Avg. Return 4.04% 14.25%
Div. Yield 1.95% 1.14%
Expense Ratio 0.04% 0.05%

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 Vanguard Small-Cap Index Fund ETF Shares (VB) is a Small Blend fund that is issued by Vanguard. It currently has 137.72B total assets under management and has yielded an average annual return of 14.25% over the past 10 years. The fund has a dividend yield of 1.14% with an expense ratio of 0.05%.

AGG’s dividend yield is 0.81% higher than that of VB (1.95% vs. 1.14%). Also, AGG yielded on average 10.21% less per year over the past decade (4.04% vs. 14.25%). The expense ratio of AGG is 0.01 percentage points lower than VB’s (0.04% vs. 0.05%).

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Fund Composition

Holdings

AGG - Holdings

AGG Bond Sectors Weight
AAA 68.92%
BBB 15.38%
A 11.16%
AA 2.92%
Others 1.63%
Below B 0.0%
B 0.0%
BB 0.0%
US Government 0.0%

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.

VB - Holdings

VB Holdings Weight
Charles River Laboratories International Inc 0.34%
Pool Corp 0.32%
Bio-Techne Corp 0.32%
Avantor Inc 0.32%
PerkinElmer Inc 0.31%
Diamondback Energy Inc 0.31%
VICI Properties Inc Ordinary Shares 0.3%
IDEX Corp 0.3%
Entegris Inc 0.3%
Novavax Inc 0.29%

VB’s Top Holdings are Charles River Laboratories International Inc, Pool Corp, Bio-Techne Corp, Avantor Inc, and PerkinElmer Inc at 0.34%, 0.32%, 0.32%, 0.32%, and 0.31%.

Diamondback Energy Inc (0.31%), VICI Properties Inc Ordinary Shares (0.3%), and IDEX Corp (0.3%) have a slightly smaller but still significant weight. Entegris Inc and Novavax Inc are also represented in the VB’s holdings at 0.3% and 0.29%.

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Risk Analysis

AGG VB
Mean Return 0.28 1.15
R-squared 99.96 85.03
Std. Deviation 3.03 17.82
Alpha -0.08 -4.02
Beta 1.01 1.21
Sharpe Ratio 0.9 0.74
Treynor Ratio 2.7 10.15

The iShares Core U.S. Aggregate Bond ETF (AGG) has a Treynor Ratio of 2.7 with a Standard Deviation of 3.03 and a Alpha of -0.08. Its Mean Return is 0.28 while AGG’s Sharpe Ratio is 0.9. Furthermore, the fund has a R-squared of 99.96 and a Beta of 1.01.

The Vanguard Small-Cap Index Fund ETF Shares (VB) has a Standard Deviation of 17.82 with a Treynor Ratio of 10.15 and a Sharpe Ratio of 0.74. Its Beta is 1.21 while VB’s R-squared is 85.03. Furthermore, the fund has a Alpha of -4.02 and a Mean Return of 1.15.

AGG’s Mean Return is 0.87 points lower than that of VB and its R-squared is 14.93 points higher. With a Standard Deviation of 3.03, AGG is slightly less volatile than VB. The Alpha and Beta of AGG are 3.94 points higher and 0.20 points lower than VB’s Alpha and Beta.

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Performance

Annual Returns

AGG vs. VB - Annual Returns

Year AGG VB
2020 7.42% 19.08%
2019 8.68% 27.37%
2018 -0.05% -9.3%
2017 3.53% 16.24%
2016 2.56% 18.31%
2015 0.48% -3.65%
2014 6.04% 7.51%
2013 -2.15% 37.8%
2012 4.04% 18.22%
2011 7.58% -2.68%
2010 6.3% 27.89%

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 VB, returning 37.8% on an annual basis. The poorest year for VB in the last ten years was 2018, with a yield of -9.3%. Most years the Vanguard Small-Cap Index Fund ETF Shares has given investors modest returns, such as in 2017, 2012, and 2016, when gains were 16.24%, 18.22%, and 18.31% respectively.

Portfolio Growth

AGG vs. VB - Portfolio Growth

Fund Initial Balance Final Balance CAGR
AGG $10,000 $15,368 4.04%
VB $10,000 $39,734 14.25%

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 VB, the end total would have been $39,734. This equates to a $29,734 profit over 11 years and a compound annual growth rate (CAGR) of 14.25%.

AGG’s CAGR is 10.21 percentage points lower than that of VB and as a result, would have yielded $24,366 less on a $10,000 investment. Thus, AGG performed worse than VB by 10.21% annually.


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