The iShares Core U.S. Aggregate Bond ETF (AGG) and the Industrial Select Sector SPDR Fund (XLI) are both among the Top 100 ETFs. AGG is a iShares Intermediate-Term Bond fund and XLI is a SPDR State Street Global Advisors Industrials fund. So, what’s the difference between AGG and XLI? And which fund is better?
The expense ratio of AGG is 0.08 percentage points lower than XLI’s (0.04% vs. 0.12%). AGG is mostly comprised of AAA bonds while XLI has a high exposure to the industrials sector. Overall, AGG has provided lower returns than XLI over the past ten years.
In this article, we’ll compare AGG vs. XLI. We’ll look at annual returns and risk metrics, as well as at their performance and industry exposure. Moreover, I’ll also discuss AGG’s and XLI’s fund composition, holdings, and portfolio growth and examine how these affect their overall returns.
|Name||iShares Core U.S. Aggregate Bond ETF||Industrial Select Sector SPDR Fund|
|Issuer||iShares||SPDR State Street Global Advisors|
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 Industrial Select Sector SPDR Fund (XLI) is a Industrials fund that is issued by SPDR State Street Global Advisors. It currently has 19.33B total assets under management and has yielded an average annual return of 14.44% over the past 10 years. The fund has a dividend yield of 1.25% with an expense ratio of 0.12%.
AGG’s dividend yield is 0.70% higher than that of XLI (1.95% vs. 1.25%). Also, AGG yielded on average 10.40% less per year over the past decade (4.04% vs. 14.44%). The expense ratio of AGG is 0.08 percentage points lower than XLI’s (0.04% vs. 0.12%).
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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.
|Honeywell International Inc||4.9%|
|United Parcel Service Inc Class B||4.84%|
|Union Pacific Corp||4.7%|
|Raytheon Technologies Corp||4.16%|
|General Electric Co||3.8%|
|Deere & Co||3.54%|
|Lockheed Martin Corp||2.98%|
XLI’s Top Holdings are Honeywell International Inc, United Parcel Service Inc Class B, Union Pacific Corp, Boeing Co, and Raytheon Technologies Corp at 4.9%, 4.84%, 4.7%, 4.24%, and 4.16%.
Caterpillar Inc (3.84%), General Electric Co (3.8%), and 3M Co (3.7%) have a slightly smaller but still significant weight. Deere & Co and Lockheed Martin Corp are also represented in the XLI’s holdings at 3.54% and 2.98%.
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The iShares Core U.S. Aggregate Bond ETF (AGG) has a Treynor Ratio of 2.7 with a Standard Deviation of 3.03 and a Alpha of -0.08. Its R-squared is 99.96 while AGG’s Sharpe Ratio is 0.9. Furthermore, the fund has a Beta of 1.01 and a Mean Return of 0.28.
The Industrial Select Sector SPDR Fund (XLI) has a Alpha of 2.38 with a Treynor Ratio of 11.34 and a Beta of 1.08. Its Sharpe Ratio is 0.76 while XLI’s Mean Return is 1.14. Furthermore, the fund has a Standard Deviation of 17.13 and a R-squared of 78.97.
AGG’s Mean Return is 0.86 points lower than that of XLI and its R-squared is 20.99 points higher. With a Standard Deviation of 3.03, AGG is slightly less volatile than XLI. The Alpha and Beta of AGG are 2.46 points lower and 0.07 points lower than XLI’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 2013 was the strongest year for XLI, returning 40.44% on an annual basis. The poorest year for XLI in the last ten years was 2018, with a yield of -13.1%. Most years the Industrial Select Sector SPDR Fund has given investors modest returns, such as in 2020, 2012, and 2016, when gains were 11.0%, 14.86%, and 19.93% 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 XLI, the end total would have been $39,853. This equates to a $29,853 profit over 11 years and a compound annual growth rate (CAGR) of 14.44%.
AGG’s CAGR is 10.40 percentage points lower than that of XLI and as a result, would have yielded $24,485 less on a $10,000 investment. Thus, AGG performed worse than XLI by 10.40% annually.
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