AGG vs. VBR: What’s The Difference?

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

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

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

Summary

AGG VBR
Name iShares Core U.S. Aggregate Bond ETF Vanguard Small-Cap Value Index Fund ETF Shares
Category Intermediate-Term Bond Small Value
Issuer iShares Vanguard
AUM 88.8B 48.08B
Avg. Return 4.04% 12.28%
Div. Yield 1.95% 1.6%
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 Value Index Fund ETF Shares (VBR) is a Small Value fund that is issued by Vanguard. It currently has 48.08B total assets under management and has yielded an average annual return of 12.28% over the past 10 years. The fund has a dividend yield of 1.6% with an expense ratio of 0.07%.

AGG’s dividend yield is 0.35% higher than that of VBR (1.95% vs. 1.6%). Also, AGG yielded on average 8.24% less per year over the past decade (4.04% vs. 12.28%). The expense ratio of AGG is 0.03 percentage points lower than VBR’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.

VBR - Holdings

VBR Holdings Weight
Diamondback Energy Inc 0.55%
VICI Properties Inc Ordinary Shares 0.54%
IDEX Corp 0.54%
Nuance Communications Inc 0.5%
Molina Healthcare Inc 0.48%
Signature Bank 0.46%
Novavax Inc 0.44%
Howmet Aerospace Inc 0.44%
Apollo Global Management Inc Class A 0.42%
Brown & Brown Inc 0.41%

VBR’s Top Holdings are Diamondback Energy Inc, VICI Properties Inc Ordinary Shares, IDEX Corp, Nuance Communications Inc, and Molina Healthcare Inc at 0.55%, 0.54%, 0.54%, 0.5%, and 0.48%.

Signature Bank (0.46%), Novavax Inc (0.44%), and Howmet Aerospace Inc (0.44%) have a slightly smaller but still significant weight. Apollo Global Management Inc Class A and Brown & Brown Inc are also represented in the VBR’s holdings at 0.42% and 0.41%.

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Risk Analysis

AGG VBR
Mean Return 0.28 1.08
R-squared 99.96 82.2
Std. Deviation 3.03 18.37
Alpha -0.08 -5.09
Beta 1.01 1.23
Sharpe Ratio 0.9 0.67
Treynor Ratio 2.7 9.15

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

The Vanguard Small-Cap Value Index Fund ETF Shares (VBR) has a R-squared of 82.2 with a Treynor Ratio of 9.15 and a Alpha of -5.09. Its Sharpe Ratio is 0.67 while VBR’s Mean Return is 1.08. Furthermore, the fund has a Beta of 1.23 and a Standard Deviation of 18.37.

AGG’s Mean Return is 0.80 points lower than that of VBR and its R-squared is 17.76 points higher. With a Standard Deviation of 3.03, AGG is slightly less volatile than VBR. The Alpha and Beta of AGG are 5.01 points higher and 0.22 points lower than VBR’s Alpha and Beta.

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Performance

Annual Returns

AGG vs. VBR - Annual Returns

Year AGG VBR
2020 7.42% 5.82%
2019 8.68% 22.76%
2018 -0.05% -12.22%
2017 3.53% 11.79%
2016 2.56% 24.8%
2015 0.48% -4.67%
2014 6.04% 10.55%
2013 -2.15% 36.57%
2012 4.04% 18.78%
2011 7.58% -4.05%
2010 6.3% 24.97%

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 VBR, returning 36.57% on an annual basis. The poorest year for VBR in the last ten years was 2018, with a yield of -12.22%. Most years the Vanguard Small-Cap Value Index Fund ETF Shares has given investors modest returns, such as in 2014, 2017, and 2012, when gains were 10.55%, 11.79%, and 18.78% respectively.

Portfolio Growth

AGG vs. VBR - Portfolio Growth

Fund Initial Balance Final Balance CAGR
AGG $10,000 $15,368 4.04%
VBR $10,000 $32,611 12.28%

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 VBR, the end total would have been $32,611. This equates to a $22,611 profit over 11 years and a compound annual growth rate (CAGR) of 12.28%.

AGG’s CAGR is 8.24 percentage points lower than that of VBR and as a result, would have yielded $17,243 less on a $10,000 investment. Thus, AGG performed worse than VBR by 8.24% annually.


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