AGG vs. VGT: What’s The Difference?

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

The expense ratio of AGG is 0.06 percentage points lower than VGT’s (0.04% vs. 0.1%). AGG is mostly comprised of AAA bonds while VGT has a high exposure to the technology sector. Overall, AGG has provided lower returns than VGT over the past ten years.

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

Summary

AGG VGT
Name iShares Core U.S. Aggregate Bond ETF Vanguard Information Technology Index Fund ETF Shares
Category Intermediate-Term Bond Technology
Issuer iShares Vanguard
AUM 88.8B 54.13B
Avg. Return 4.04% 20.84%
Div. Yield 1.95% 0.66%
Expense Ratio 0.04% 0.1%

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 Information Technology Index Fund ETF Shares (VGT) is a Technology fund that is issued by Vanguard. It currently has 54.13B total assets under management and has yielded an average annual return of 20.84% over the past 10 years. The fund has a dividend yield of 0.66% with an expense ratio of 0.1%.

AGG’s dividend yield is 1.29% higher than that of VGT (1.95% vs. 0.66%). Also, AGG yielded on average 16.80% less per year over the past decade (4.04% vs. 20.84%). The expense ratio of AGG is 0.06 percentage points lower than VGT’s (0.04% vs. 0.1%).

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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.

VGT - Holdings

VGT Holdings Weight
Apple Inc 19.58%
Microsoft Corp 16.53%
NVIDIA Corp 4.22%
Visa Inc Class A 3.16%
PayPal Holdings Inc 2.76%
Mastercard Inc Class A 2.76%
Adobe Inc 2.39%
Intel Corp 1.94%
Salesforce.com Inc 1.91%
Cisco Systems Inc 1.9%

VGT’s Top Holdings are Apple Inc, Microsoft Corp, NVIDIA Corp, Visa Inc Class A, and PayPal Holdings Inc at 19.58%, 16.53%, 4.22%, 3.16%, and 2.76%.

Mastercard Inc Class A (2.76%), Adobe Inc (2.39%), and Intel Corp (1.94%) have a slightly smaller but still significant weight. Salesforce.com Inc and Cisco Systems Inc are also represented in the VGT’s holdings at 1.91% and 1.9%.

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Risk Analysis

AGG VGT
Mean Return 0.28 1.76
R-squared 99.96 74.84
Std. Deviation 3.03 16.61
Alpha -0.08 10.41
Beta 1.01 1.02
Sharpe Ratio 0.9 1.23
Treynor Ratio 2.7 20.55

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

The Vanguard Information Technology Index Fund ETF Shares (VGT) has a Alpha of 10.41 with a Treynor Ratio of 20.55 and a Beta of 1.02. Its Mean Return is 1.76 while VGT’s R-squared is 74.84. Furthermore, the fund has a Sharpe Ratio of 1.23 and a Standard Deviation of 16.61.

AGG’s Mean Return is 1.48 points lower than that of VGT and its R-squared is 25.12 points higher. With a Standard Deviation of 3.03, AGG is slightly less volatile than VGT. The Alpha and Beta of AGG are 10.49 points lower and 0.01 points lower than VGT’s Alpha and Beta.

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Performance

Annual Returns

AGG vs. VGT - Annual Returns

Year AGG VGT
2020 7.42% 45.94%
2019 8.68% 48.68%
2018 -0.05% 2.52%
2017 3.53% 37.07%
2016 2.56% 13.73%
2015 0.48% 5.02%
2014 6.04% 18.01%
2013 -2.15% 30.91%
2012 4.04% 14.05%
2011 7.58% 0.52%
2010 6.3% 12.74%

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 VGT, returning 48.68% on an annual basis. The poorest year for VGT in the last ten years was 2011, with a yield of 0.52%. Most years the Vanguard Information Technology Index Fund ETF Shares has given investors modest returns, such as in 2016, 2012, and 2014, when gains were 13.73%, 14.05%, and 18.01% respectively.

Portfolio Growth

AGG vs. VGT - Portfolio Growth

Fund Initial Balance Final Balance CAGR
AGG $10,000 $15,368 4.04%
VGT $10,000 $72,718 20.84%

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 VGT, the end total would have been $72,718. This equates to a $62,718 profit over 11 years and a compound annual growth rate (CAGR) of 20.84%.

AGG’s CAGR is 16.80 percentage points lower than that of VGT and as a result, would have yielded $57,350 less on a $10,000 investment. Thus, AGG performed worse than VGT by 16.80% annually.


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