The iShares Core U.S. Aggregate Bond ETF (AGG) and the Vanguard Dividend Appreciation Index Fund ETF Shares (VIG) are both among the Top 100 ETFs. AGG is a iShares Intermediate-Term Bond fund and VIG is a Vanguard Large Blend fund. So, what’s the difference between AGG and VIG? And which fund is better?
The expense ratio of AGG is 0.02 percentage points lower than VIG’s (0.04% vs. 0.06%). AGG is mostly comprised of AAA bonds while VIG has a high exposure to the industrials sector. Overall, AGG has provided lower returns than VIG over the past ten years.
In this article, we’ll compare AGG vs. VIG. We’ll look at annual returns and portfolio growth, as well as at their performance and risk metrics. Moreover, I’ll also discuss AGG’s and VIG’s industry exposure, holdings, and fund composition and examine how these affect their overall returns.
|Name||iShares Core U.S. Aggregate Bond ETF||Vanguard Dividend Appreciation Index Fund ETF Shares|
|Category||Intermediate-Term Bond||Large Blend|
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 Dividend Appreciation Index Fund ETF Shares (VIG) is a Large Blend fund that is issued by Vanguard. It currently has 71.92B total assets under management and has yielded an average annual return of 13.35% over the past 10 years. The fund has a dividend yield of 1.56% with an expense ratio of 0.06%.
AGG’s dividend yield is 0.39% higher than that of VIG (1.95% vs. 1.56%). Also, AGG yielded on average 9.31% less per year over the past decade (4.04% vs. 13.35%). The expense ratio of AGG is 0.02 percentage points lower than VIG’s (0.04% vs. 0.06%).
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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.
|JPMorgan Chase & Co||3.8%|
|Johnson & Johnson||3.67%|
|Visa Inc Class A||3.22%|
|UnitedHealth Group Inc||3.22%|
|The Home Depot Inc||2.91%|
|Procter & Gamble Co||2.82%|
|Comcast Corp Class A||2.21%|
VIG’s Top Holdings are Microsoft Corp, JPMorgan Chase & Co, Johnson & Johnson, Walmart Inc, and Visa Inc Class A at 4.19%, 3.8%, 3.67%, 3.38%, and 3.22%.
UnitedHealth Group Inc (3.22%), The Home Depot Inc (2.91%), and Procter & Gamble Co (2.82%) have a slightly smaller but still significant weight. Comcast Corp Class A and Coca-Cola Co are also represented in the VIG’s holdings at 2.21% and 1.98%.
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The iShares Core U.S. Aggregate Bond ETF (AGG) has a Mean Return of 0.28 with a Alpha of -0.08 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 Treynor Ratio of 2.7 and a Beta of 1.01.
The Vanguard Dividend Appreciation Index Fund ETF Shares (VIG) has a Sharpe Ratio of 1.01 with a Alpha of 0.12 and a Mean Return of 1.09. Its Beta is 0.86 while VIG’s Standard Deviation is 12.25. Furthermore, the fund has a R-squared of 92.2 and a Treynor Ratio of 14.33.
AGG’s Mean Return is 0.81 points lower than that of VIG and its R-squared is 7.76 points higher. With a Standard Deviation of 3.03, AGG is slightly less volatile than VIG. The Alpha and Beta of AGG are 0.20 points lower and 0.15 points higher than VIG’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 VIG, returning 29.71% on an annual basis. The poorest year for VIG in the last ten years was 2018, with a yield of -2.02%. Most years the Vanguard Dividend Appreciation Index Fund ETF Shares has given investors modest returns, such as in 2012, 2016, and 2010, when gains were 11.61%, 11.84%, and 14.67% 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 VIG, the end total would have been $37,951. This equates to a $27,951 profit over 11 years and a compound annual growth rate (CAGR) of 13.35%.
AGG’s CAGR is 9.31 percentage points lower than that of VIG and as a result, would have yielded $22,583 less on a $10,000 investment. Thus, AGG performed worse than VIG by 9.31% annually.
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