IGSB vs. DFAC: What’s The Difference?

The iShares 1-5 Year Investment Grade Corporate Bond ETF (IGSB) and the Dimensional U.S. Core Equity 2 ETF (DFAC) are both among the Top 100 ETFs. IGSB is a iShares Short-Term Bond fund and DFAC is a Dimensional Fund Advisors Large Blend fund. So, what’s the difference between IGSB and DFAC? And which fund is better?

The expense ratio of IGSB is 0.13 percentage points lower than DFAC’s (0.06% vs. 0.19%). IGSB is mostly comprised of BBB bonds while DFAC has a high exposure to the technology sector. Overall, IGSB has provided lower returns than DFAC over the past 11 years.

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

Summary

IGSB DFAC
Name iShares 1-5 Year Investment Grade Corporate Bond ETF Dimensional U.S. Core Equity 2 ETF
Category Short-Term Bond Large Blend
Issuer iShares Dimensional Fund Advisors
AUM 26.63B 13.53B
Avg. Return 2.51% 13.93%
Div. Yield 2.02% 1.0%
Expense Ratio 0.06% 0.19%

The iShares 1-5 Year Investment Grade Corporate Bond ETF (IGSB) is a Short-Term Bond fund that is issued by iShares. It currently has 26.63B total assets under management and has yielded an average annual return of 2.51% over the past 10 years. The fund has a dividend yield of 2.02% with an expense ratio of 0.06%.

The Dimensional U.S. Core Equity 2 ETF (DFAC) is a Large Blend fund that is issued by Dimensional Fund Advisors. It currently has 13.53B total assets under management and has yielded an average annual return of 13.93% over the past 10 years. The fund has a dividend yield of 1.0% with an expense ratio of 0.19%.

IGSB’s dividend yield is 1.02% higher than that of DFAC (2.02% vs. 1.0%). Also, IGSB yielded on average 11.43% less per year over the past decade (2.51% vs. 13.93%). The expense ratio of IGSB is 0.13 percentage points lower than DFAC’s (0.06% vs. 0.19%).

Fund Composition

Holdings

IGSB - Holdings

IGSB Bond Sectors Weight
BBB 50.48%
A 40.04%
AA 7.46%
AAA 2.21%
BB 0.09%
Below B 0.0%
B 0.0%
US Government 0.0%
Others -0.28%

IGSB’s Top Bond Sectors are ratings of BBB, A, AA, AAA, and BB at 50.48%, 40.04%, 7.46%, 2.21%, and 0.09%. The fund is less weighted towards Below B (0.0%), B (0.0%), and US Government (0.0%) rated bonds.

DFAC - Holdings

DFAC Holdings Weight
Apple Inc 4.7%
Microsoft Corp 3.81%
Amazon.com Inc 2.39%
Johnson & Johnson 1.05%
Facebook Inc Class A 1.05%
JPMorgan Chase & Co 1.0%
Alphabet Inc Class C 0.85%
Alphabet Inc Class A 0.84%
Berkshire Hathaway Inc Class B 0.75%
Visa Inc Class A 0.74%

DFAC’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Johnson & Johnson, and Facebook Inc Class A at 4.7%, 3.81%, 2.39%, 1.05%, and 1.05%.

JPMorgan Chase & Co (1.0%), Alphabet Inc Class C (0.85%), and Alphabet Inc Class A (0.84%) have a slightly smaller but still significant weight. Berkshire Hathaway Inc Class B and Visa Inc Class A are also represented in the DFAC’s holdings at 0.75% and 0.74%.

Risk Analysis

IGSB DFAC
Mean Return 0.19 1.19
R-squared 26.13 95.1
Std. Deviation 2 15.55
Alpha 0.69 -2.75
Beta 0.34 1.12
Sharpe Ratio 0.82 0.88
Treynor Ratio 4.82 11.85

The iShares 1-5 Year Investment Grade Corporate Bond ETF (IGSB) has a Mean Return of 0.19 with a Beta of 0.34 and a Alpha of 0.69. Its Treynor Ratio is 4.82 while IGSB’s R-squared is 26.13. Furthermore, the fund has a Standard Deviation of 2 and a Sharpe Ratio of 0.82.

The Dimensional U.S. Core Equity 2 ETF (DFAC) has a Treynor Ratio of 11.85 with a Standard Deviation of 15.55 and a R-squared of 95.1. Its Sharpe Ratio is 0.88 while DFAC’s Mean Return is 1.19. Furthermore, the fund has a Beta of 1.12 and a Alpha of -2.75.

IGSB’s Mean Return is 1.00 points lower than that of DFAC and its R-squared is 68.97 points lower. With a Standard Deviation of 2, IGSB is slightly less volatile than DFAC. The Alpha and Beta of IGSB are 3.44 points higher and 0.78 points lower than DFAC’s Alpha and Beta.

Performance

Annual Returns

IGSB vs. DFAC - Annual Returns

Year IGSB DFAC
2020 5.26% 15.8%
2019 7.01% 29.54%
2018 1.34% -9.43%
2017 1.41% 18.82%
2016 1.77% 16.31%
2015 0.7% -2.53%
2014 0.74% 9.56%
2013 1.03% 37.55%
2012 3.28% 17.93%
2011 1.34% -1.96%
2010 3.69% 21.67%

IGSB had its best year in 2019 with an annual return of 7.01%. IGSB’s worst year over the past decade yielded 0.7% and occurred in 2015. In most years the iShares 1-5 Year Investment Grade Corporate Bond ETF provided moderate returns such as in 2011, 2017, and 2016 where annual returns amounted to 1.34%, 1.41%, and 1.77% respectively.

The year 2013 was the strongest year for DFAC, returning 37.55% on an annual basis. The poorest year for DFAC in the last ten years was 2018, with a yield of -9.43%. Most years the Dimensional U.S. Core Equity 2 ETF has given investors modest returns, such as in 2020, 2016, and 2012, when gains were 15.8%, 16.31%, and 17.93% respectively.

Portfolio Growth

IGSB vs. DFAC - Portfolio Growth

Fund Initial Balance Final Balance CAGR
IGSB $10,000 $13,103 2.51%
DFAC $10,000 $38,796 13.93%

A $10,000 investment in IGSB would have resulted in a final balance of $13,103. This is a profit of $3,103 over 11 years and amounts to a compound annual growth rate (CAGR) of 2.51%.

With a $10,000 investment in DFAC, the end total would have been $38,796. This equates to a $28,796 profit over 11 years and a compound annual growth rate (CAGR) of 13.93%.

IGSB’s CAGR is 11.43 percentage points lower than that of DFAC and as a result, would have yielded $25,693 less on a $10,000 investment. Thus, IGSB performed worse than DFAC by 11.43% annually.


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