The iShares Core U.S. Aggregate Bond ETF (AGG) and the Vanguard FTSE Europe Index Fund ETF Shares (VGK) are both among the Top 100 ETFs. AGG is a iShares Intermediate-Term Bond fund and VGK is a Vanguard Europe Stock fund. So, what’s the difference between AGG and VGK? And which fund is better?
The expense ratio of AGG is 0.04 percentage points lower than VGK’s (0.04% vs. 0.08%). AGG is mostly comprised of AAA bonds while VGK has a high exposure to the financial services sector. Overall, AGG has provided lower returns than VGK over the past ten years.
In this article, we’ll compare AGG vs. VGK. We’ll look at holdings and performance, as well as at their industry exposure and annual returns. Moreover, I’ll also discuss AGG’s and VGK’s risk metrics, fund composition, and portfolio growth and examine how these affect their overall returns.
|Name||iShares Core U.S. Aggregate Bond ETF||Vanguard FTSE Europe Index Fund ETF Shares|
|Category||Intermediate-Term Bond||Europe Stock|
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 FTSE Europe Index Fund ETF Shares (VGK) is a Europe Stock fund that is issued by Vanguard. It currently has 25.7B total assets under management and has yielded an average annual return of 6.68% over the past 10 years. The fund has a dividend yield of 2.52% with an expense ratio of 0.08%.
AGG’s dividend yield is 0.57% lower than that of VGK (1.95% vs. 2.52%). Also, AGG yielded on average 2.64% less per year over the past decade (4.04% vs. 6.68%). The expense ratio of AGG is 0.04 percentage points lower than VGK’s (0.04% vs. 0.08%).
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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.
|ASML Holding NV||2.2%|
|Roche Holding AG||2.13%|
|LVMH Moet Hennessy Louis Vuitton SE||1.58%|
|Novo Nordisk A/S B||1.09%|
VGK’s Top Holdings are Nestle SA, ASML Holding NV, Roche Holding AG, LVMH Moet Hennessy Louis Vuitton SE, and Novartis AG at 2.82%, 2.2%, 2.13%, 1.58%, and 1.55%.
AstraZeneca PLC (1.27%), SAP SE (1.25%), and Unilever PLC (1.23%) have a slightly smaller but still significant weight. Novo Nordisk A/S B and Siemens AG are also represented in the VGK’s holdings at 1.09% and 0.96%.
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The iShares Core U.S. Aggregate Bond ETF (AGG) has a Sharpe Ratio of 0.9 with a Mean Return of 0.28 and a Treynor Ratio of 2.7. Its Standard Deviation is 3.03 while AGG’s Alpha is -0.08. Furthermore, the fund has a Beta of 1.01 and a R-squared of 99.96.
The Vanguard FTSE Europe Index Fund ETF Shares (VGK) has a Standard Deviation of 16.65 with a Alpha of 0.45 and a Sharpe Ratio of 0.4. Its R-squared is 92.76 while VGK’s Mean Return is 0.61. Furthermore, the fund has a Beta of 1.06 and a Treynor Ratio of 5.12.
AGG’s Mean Return is 0.33 points lower than that of VGK and its R-squared is 7.20 points higher. With a Standard Deviation of 3.03, AGG is slightly less volatile than VGK. The Alpha and Beta of AGG are 0.53 points lower and 0.05 points lower than VGK’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 2017 was the strongest year for VGK, returning 27.06% on an annual basis. The poorest year for VGK in the last ten years was 2018, with a yield of -14.79%. Most years the Vanguard FTSE Europe Index Fund ETF Shares has given investors modest returns, such as in 2016, 2010, and 2020, when gains were -0.59%, 5.01%, and 6.5% 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 VGK, the end total would have been $18,350. This equates to a $8,350 profit over 11 years and a compound annual growth rate (CAGR) of 6.68%.
AGG’s CAGR is 2.64 percentage points lower than that of VGK and as a result, would have yielded $2,982 less on a $10,000 investment. Thus, AGG performed worse than VGK by 2.64% annually.
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