The iShares iBoxx $ High Yield Corporate Bond ETF (HYG) and the Vanguard Short-Term Inflation-Protected Securities Index Fund ETF Shares (VTIP) are both among the Top 100 ETFs. HYG is a iShares High Yield Bond fund and VTIP is a Vanguard Inflation-Protected Bond fund. So, what’s the difference between HYG and VTIP? And which fund is better?
The expense ratio of HYG is 0.43 percentage points higher than VTIP’s (0.48% vs. 0.05%). HYG is mostly comprised of BB bonds and VTIP has a high exposure to AAA bond. Overall, HYG has provided higher returns than VTIP over the past 7 years.
In this article, we’ll compare HYG vs. VTIP. We’ll look at industry exposure and performance, as well as at their holdings and risk metrics. Moreover, I’ll also discuss HYG’s and VTIP’s portfolio growth, annual returns, and fund composition and examine how these affect their overall returns.
|Name||iShares iBoxx $ High Yield Corporate Bond ETF||Vanguard Short-Term Inflation-Protected Securities Index Fund ETF Shares|
|Category||High Yield Bond||Inflation-Protected Bond|
The iShares iBoxx $ High Yield Corporate Bond ETF (HYG) is a High Yield Bond fund that is issued by iShares. It currently has 20.03B total assets under management and has yielded an average annual return of 6.42% over the past 10 years. The fund has a dividend yield of 4.44% with an expense ratio of 0.48%.
The Vanguard Short-Term Inflation-Protected Securities Index Fund ETF Shares (VTIP) is a Inflation-Protected Bond fund that is issued by Vanguard. It currently has 50.67B total assets under management and has yielded an average annual return of 1.79% over the past 10 years. The fund has a dividend yield of 1.35% with an expense ratio of 0.05%.
HYG’s dividend yield is 3.09% higher than that of VTIP (4.44% vs. 1.35%). Also, HYG yielded on average 4.62% more per year over the past decade (6.42% vs. 1.79%). The expense ratio of HYG is 0.43 percentage points higher than VTIP’s (0.48% vs. 0.05%).
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|HYG Bond Sectors||Weight|
HYG’s Top Bond Sectors are ratings of BB, B, Below B, BBB, and AAA at 56.53%, 31.27%, 11.4%, 0.61%, and 0.28%. The fund is less weighted towards A (0.0%), AA (0.0%), and US Government (0.0%) rated bonds.
|VTIP Bond Sectors||Weight|
VTIP’s Top Bond Sectors are ratings of AAA, Others, Below B, B, and BB at 99.87%, 0.13%, 0.0%, 0.0%, and 0.0%. The fund is less weighted towards BBB (0.0%), A (0.0%), and AA (0.0%) rated bonds.
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The iShares iBoxx $ High Yield Corporate Bond ETF (HYG) has a Sharpe Ratio of 0.7 with a Beta of 0.48 and a Mean Return of 0.46. Its Alpha is 3.58 while HYG’s R-squared is 4.1. Furthermore, the fund has a Treynor Ratio of 10.01 and a Standard Deviation of 6.96.
The Vanguard Short-Term Inflation-Protected Securities Index Fund ETF Shares (VTIP) has a Mean Return of 0 with a Alpha of 0 and a Standard Deviation of 0. Its Sharpe Ratio is 0 while VTIP’s Beta is 0. Furthermore, the fund has a R-squared of 0 and a Treynor Ratio of 0.
HYG’s Mean Return is 0.46 points higher than that of VTIP and its R-squared is 4.10 points higher. With a Standard Deviation of 6.96, HYG is slightly more volatile than VTIP. The Alpha and Beta of HYG are 3.58 points higher and 0.48 points higher than VTIP’s Alpha and Beta.
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HYG had its best year in 2019 with an annual return of 14.23%. HYG’s worst year over the past decade yielded -5.55% and occurred in 2015. In most years the iShares iBoxx $ High Yield Corporate Bond ETF provided moderate returns such as in 2011, 2013, and 2017 where annual returns amounted to 5.89%, 5.9%, and 6.09% respectively.
The year 2020 was the strongest year for VTIP, returning 4.97% on an annual basis. The poorest year for VTIP in the last ten years was 2013, with a yield of -1.55%. Most years the Vanguard Short-Term Inflation-Protected Securities Index Fund ETF Shares has given investors modest returns, such as in 2011, 2010, and 2018, when gains were 0.0%, 0.0%, and 0.54% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in HYG would have resulted in a final balance of $13,580. This is a profit of $3,580 over 7 years and amounts to a compound annual growth rate (CAGR) of 6.42%.
With a $10,000 investment in VTIP, the end total would have been $11,305. This equates to a $1,305 profit over 7 years and a compound annual growth rate (CAGR) of 1.79%.
HYG’s CAGR is 4.62 percentage points higher than that of VTIP and as a result, would have yielded $2,275 more on a $10,000 investment. Thus, HYG outperformed VTIP by 4.62% annually.
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