AGG vs. VBK: What’s The Difference?

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

The expense ratio of AGG is 0.03 percentage points lower than VBK’s (0.04% vs. 0.07%). AGG is mostly comprised of AAA bonds while VBK has a high exposure to the technology sector. Overall, AGG has provided lower returns than VBK over the past ten years.

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

Summary

AGG VBK
Name iShares Core U.S. Aggregate Bond ETF Vanguard Small-Cap Growth Index Fund ETF Shares
Category Intermediate-Term Bond Small Growth
Issuer iShares Vanguard
AUM 88.8B 37.89B
Avg. Return 4.04% 16.53%
Div. Yield 1.95% 0.45%
Expense Ratio 0.04% 0.07%

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 Growth Index Fund ETF Shares (VBK) is a Small Growth fund that is issued by Vanguard. It currently has 37.89B total assets under management and has yielded an average annual return of 16.53% over the past 10 years. The fund has a dividend yield of 0.45% with an expense ratio of 0.07%.

AGG’s dividend yield is 1.50% higher than that of VBK (1.95% vs. 0.45%). Also, AGG yielded on average 12.49% less per year over the past decade (4.04% vs. 16.53%). The expense ratio of AGG is 0.03 percentage points lower than VBK’s (0.04% vs. 0.07%).

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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.

VBK - Holdings

VBK Holdings Weight
Charles River Laboratories International Inc 0.78%
Pool Corp 0.73%
Bio-Techne Corp 0.73%
Avantor Inc 0.73%
PerkinElmer Inc 0.72%
Entegris Inc 0.7%
PTC Inc 0.62%
Fair Isaac Corp 0.57%
Bill.com Holdings Inc Ordinary Shares 0.56%
Avalara Inc 0.55%

VBK’s Top Holdings are Charles River Laboratories International Inc, Pool Corp, Bio-Techne Corp, Avantor Inc, and PerkinElmer Inc at 0.78%, 0.73%, 0.73%, 0.73%, and 0.72%.

Entegris Inc (0.7%), PTC Inc (0.62%), and Fair Isaac Corp (0.57%) have a slightly smaller but still significant weight. Bill.com Holdings Inc Ordinary Shares and Avalara Inc are also represented in the VBK’s holdings at 0.56% and 0.55%.

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Risk Analysis

AGG VBK
Mean Return 0.28 1.22
R-squared 99.96 80.56
Std. Deviation 3.03 17.95
Alpha -0.08 -2.81
Beta 1.01 1.18
Sharpe Ratio 0.9 0.78
Treynor Ratio 2.7 11.18

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

The Vanguard Small-Cap Growth Index Fund ETF Shares (VBK) has a Beta of 1.18 with a Standard Deviation of 17.95 and a Alpha of -2.81. Its Mean Return is 1.22 while VBK’s Treynor Ratio is 11.18. Furthermore, the fund has a R-squared of 80.56 and a Sharpe Ratio of 0.78.

AGG’s Mean Return is 0.94 points lower than that of VBK and its R-squared is 19.40 points higher. With a Standard Deviation of 3.03, AGG is slightly less volatile than VBK. The Alpha and Beta of AGG are 2.73 points higher and 0.17 points lower than VBK’s Alpha and Beta.

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Performance

Annual Returns

AGG vs. VBK - Annual Returns

Year AGG VBK
2020 7.42% 35.29%
2019 8.68% 32.75%
2018 -0.05% -5.68%
2017 3.53% 21.9%
2016 2.56% 10.74%
2015 0.48% -2.51%
2014 6.04% 4.02%
2013 -2.15% 38.18%
2012 4.04% 17.67%
2011 7.58% -1.43%
2010 6.3% 30.87%

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 VBK, returning 38.18% on an annual basis. The poorest year for VBK in the last ten years was 2018, with a yield of -5.68%. Most years the Vanguard Small-Cap Growth Index Fund ETF Shares has given investors modest returns, such as in 2016, 2012, and 2017, when gains were 10.74%, 17.67%, and 21.9% respectively.

Portfolio Growth

AGG vs. VBK - Portfolio Growth

Fund Initial Balance Final Balance CAGR
AGG $10,000 $15,368 4.04%
VBK $10,000 $48,639 16.53%

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 VBK, the end total would have been $48,639. This equates to a $38,639 profit over 11 years and a compound annual growth rate (CAGR) of 16.53%.

AGG’s CAGR is 12.49 percentage points lower than that of VBK and as a result, would have yielded $33,271 less on a $10,000 investment. Thus, AGG performed worse than VBK by 12.49% annually.


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