IGSB vs. VHT: What’s The Difference?

The iShares 1-5 Year Investment Grade Corporate Bond ETF (IGSB) and the Vanguard Health Care Index Fund ETF Shares (VHT) are both among the Top 100 ETFs. IGSB is a iShares Short-Term Bond fund and VHT is a Vanguard Health fund. So, what’s the difference between IGSB and VHT? And which fund is better?

The expense ratio of IGSB is 0.04 percentage points lower than VHT’s (0.06% vs. 0.1%). IGSB is mostly comprised of BBB bonds while VHT has a high exposure to the healthcare sector. Overall, IGSB has provided lower returns than VHT over the past 11 years.

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

Summary

IGSB VHT
Name iShares 1-5 Year Investment Grade Corporate Bond ETF Vanguard Health Care Index Fund ETF Shares
Category Short-Term Bond Health
Issuer iShares Vanguard
AUM 26.63B 17.94B
Avg. Return 2.51% 16.04%
Div. Yield 2.02% 1.15%
Expense Ratio 0.06% 0.1%

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 Vanguard Health Care Index Fund ETF Shares (VHT) is a Health fund that is issued by Vanguard. It currently has 17.94B total assets under management and has yielded an average annual return of 16.04% over the past 10 years. The fund has a dividend yield of 1.15% with an expense ratio of 0.1%.

IGSB’s dividend yield is 0.87% higher than that of VHT (2.02% vs. 1.15%). Also, IGSB yielded on average 13.53% less per year over the past decade (2.51% vs. 16.04%). The expense ratio of IGSB is 0.04 percentage points lower than VHT’s (0.06% vs. 0.1%).

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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.

VHT - Holdings

VHT Holdings Weight
Johnson & Johnson 7.34%
UnitedHealth Group Inc 6.44%
Pfizer Inc 3.7%
Abbott Laboratories 3.48%
Thermo Fisher Scientific Inc 3.37%
AbbVie Inc 3.37%
Merck & Co Inc 3.33%
Eli Lilly and Co 3.17%
Danaher Corp 2.91%
Medtronic PLC 2.83%

VHT’s Top Holdings are Johnson & Johnson, UnitedHealth Group Inc, Pfizer Inc, Abbott Laboratories, and Thermo Fisher Scientific Inc at 7.34%, 6.44%, 3.7%, 3.48%, and 3.37%.

AbbVie Inc (3.37%), Merck & Co Inc (3.33%), and Eli Lilly and Co (3.17%) have a slightly smaller but still significant weight. Danaher Corp and Medtronic PLC are also represented in the VHT’s holdings at 2.91% and 2.83%.

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Risk Analysis

IGSB VHT
Mean Return 0.19 1.33
R-squared 26.13 59.86
Std. Deviation 2 13.58
Alpha 0.69 7.99
Beta 0.34 0.75
Sharpe Ratio 0.82 1.13
Treynor Ratio 4.82 20.74

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

The Vanguard Health Care Index Fund ETF Shares (VHT) has a Sharpe Ratio of 1.13 with a Alpha of 7.99 and a Standard Deviation of 13.58. Its Mean Return is 1.33 while VHT’s R-squared is 59.86. Furthermore, the fund has a Beta of 0.75 and a Treynor Ratio of 20.74.

IGSB’s Mean Return is 1.14 points lower than that of VHT and its R-squared is 33.73 points lower. With a Standard Deviation of 2, IGSB is slightly less volatile than VHT. The Alpha and Beta of IGSB are 7.30 points lower and 0.41 points lower than VHT’s Alpha and Beta.

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Performance

Annual Returns

IGSB vs. VHT - Annual Returns

Year IGSB VHT
2020 5.26% 18.21%
2019 7.01% 21.97%
2018 1.34% 5.55%
2017 1.41% 23.34%
2016 1.77% -3.33%
2015 0.7% 7.22%
2014 0.74% 25.38%
2013 1.03% 42.67%
2012 3.28% 19.1%
2011 1.34% 10.57%
2010 3.69% 5.75%

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 VHT, returning 42.67% on an annual basis. The poorest year for VHT in the last ten years was 2016, with a yield of -3.33%. Most years the Vanguard Health Care Index Fund ETF Shares has given investors modest returns, such as in 2011, 2020, and 2012, when gains were 10.57%, 18.21%, and 19.1% respectively.

Portfolio Growth

IGSB vs. VHT - Portfolio Growth

Fund Initial Balance Final Balance CAGR
IGSB $10,000 $13,103 2.51%
VHT $10,000 $48,464 16.04%

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 VHT, the end total would have been $48,464. This equates to a $38,464 profit over 11 years and a compound annual growth rate (CAGR) of 16.04%.

IGSB’s CAGR is 13.53 percentage points lower than that of VHT and as a result, would have yielded $35,361 less on a $10,000 investment. Thus, IGSB performed worse than VHT by 13.53% annually.


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