The iShares Core U.S. Aggregate Bond ETF (AGG) and the Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares (VCIT) are both among the Top 100 ETFs. AGG is a iShares Intermediate-Term Bond fund and VCIT is a Vanguard Corporate Bond fund. So, what’s the difference between AGG and VCIT? And which fund is better?
The expense ratio of AGG is 0.01 percentage points lower than VCIT’s (0.04% vs. 0.05%). AGG is mostly comprised of AAA bonds and VCIT has a high exposure to BBB bond. Overall, AGG has provided lower returns than VCIT over the past ten years.
In this article, we’ll compare AGG vs. VCIT. We’ll look at holdings and performance, as well as at their fund composition and portfolio growth. Moreover, I’ll also discuss AGG’s and VCIT’s annual returns, risk metrics, and industry exposure and examine how these affect their overall returns.
|Name||iShares Core U.S. Aggregate Bond ETF||Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares|
|Category||Intermediate-Term Bond||Corporate Bond|
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 Intermediate-Term Corporate Bond Index Fund ETF Shares (VCIT) is a Corporate Bond fund that is issued by Vanguard. It currently has 48.39B total assets under management and has yielded an average annual return of 5.84% over the past 10 years. The fund has a dividend yield of 2.33% with an expense ratio of 0.05%.
AGG’s dividend yield is 0.38% lower than that of VCIT (1.95% vs. 2.33%). Also, AGG yielded on average 1.80% less per year over the past decade (4.04% vs. 5.84%). The expense ratio of AGG is 0.01 percentage points lower than VCIT’s (0.04% vs. 0.05%).
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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.
|VCIT Bond Sectors||Weight|
VCIT’s Top Bond Sectors are ratings of BBB, A, AA, AAA, and Below B at 55.28%, 37.85%, 5.22%, 1.57%, and 0.08%. The fund is less weighted towards Others (0.0%), B (0.0%), and BB (0.0%) rated bonds.
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The iShares Core U.S. Aggregate Bond ETF (AGG) has a Mean Return of 0.28 with a Treynor Ratio of 2.7 and a R-squared of 99.96. Its Standard Deviation is 3.03 while AGG’s Sharpe Ratio is 0.9. Furthermore, the fund has a Alpha of -0.08 and a Beta of 1.01.
The Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares (VCIT) has a Mean Return of 0.44 with a Treynor Ratio of 3.43 and a Sharpe Ratio of 0.91. Its Standard Deviation is 5.08 while VCIT’s Beta is 1.35. Furthermore, the fund has a Alpha of 0.89 and a R-squared of 63.18.
AGG’s Mean Return is 0.16 points lower than that of VCIT and its R-squared is 36.78 points higher. With a Standard Deviation of 3.03, AGG is slightly less volatile than VCIT. The Alpha and Beta of AGG are 0.97 points lower and 0.34 points lower than VCIT’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 VCIT, returning 13.97% on an annual basis. The poorest year for VCIT in the last ten years was 2013, with a yield of -1.8%. Most years the Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares has given investors modest returns, such as in 2017, 2014, and 2011, when gains were 5.5%, 7.47%, and 7.94% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in AGG would have resulted in a final balance of $14,457. This is a profit of $4,457 over 10 years and amounts to a compound annual growth rate (CAGR) of 4.04%.
With a $10,000 investment in VCIT, the end total would have been $17,439. This equates to a $7,439 profit over 10 years and a compound annual growth rate (CAGR) of 5.84%.
AGG’s CAGR is 1.80 percentage points lower than that of VCIT and as a result, would have yielded $2,982 less on a $10,000 investment. Thus, AGG performed worse than VCIT by 1.80% annually.
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