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IWM vs. SHY: What’s The Difference?

The iShares Russell 2000 ETF (IWM) and the iShares 1-3 Year Treasury Bond ETF (SHY) are both among the Top 100 ETFs. IWM is a iShares Small Blend fund and SHY is a iShares Short Government fund. So, what’s the difference between IWM and SHY? And which fund is better?

The expense ratio of IWM is 0.04 percentage points higher than SHY’s (0.19% vs. 0.15%). IWM also has a high exposure to the healthcare sector while SHY is mostly comprised of AAA bonds. Overall, IWM has provided higher returns than SHY over the past ten years.

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

Introduction To Mutual Funds
Introduction To Mutual Funds
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Summary

IWMSHY
NameiShares Russell 2000 ETFiShares 1-3 Year Treasury Bond ETF
CategorySmall BlendShort Government
IssueriSharesiShares
AUM66.48B19.51B
Avg. Return13.52%1.27%
Div. Yield0.86%0.46%
Expense Ratio0.19%0.15%

The iShares Russell 2000 ETF (IWM) is a Small Blend fund that is issued by iShares. It currently has 66.48B total assets under management and has yielded an average annual return of 13.52% over the past 10 years. The fund has a dividend yield of 0.86% with an expense ratio of 0.19%.

The iShares 1-3 Year Treasury Bond ETF (SHY) is a Short Government fund that is issued by iShares. It currently has 19.51B total assets under management and has yielded an average annual return of 1.27% over the past 10 years. The fund has a dividend yield of 0.46% with an expense ratio of 0.15%.

IWM’s dividend yield is 0.40% higher than that of SHY (0.86% vs. 0.46%). Also, IWM yielded on average 12.25% more per year over the past decade (13.52% vs. 1.27%). The expense ratio of IWM is 0.04 percentage points higher than SHY’s (0.19% vs. 0.15%).

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Fund Composition

Holdings

IWM - Holdings

IWM HoldingsWeight
AMC Entertainment Holdings Inc Class A0.52%
Intellia Therapeutics Inc0.33%
Crocs Inc0.3%
BlackRock Cash Funds Treasury SL Agency0.29%
Tenet Healthcare Corp0.26%
Lattice Semiconductor Corp0.26%
Tetra Tech Inc0.25%
II-VI Inc0.25%
EastGroup Properties Inc0.24%
Arrowhead Pharmaceuticals Inc0.24%

IWM’s Top Holdings are AMC Entertainment Holdings Inc Class A, Intellia Therapeutics Inc, Crocs Inc, BlackRock Cash Funds Treasury SL Agency, and Tenet Healthcare Corp at 0.52%, 0.33%, 0.3%, 0.29%, and 0.26%.

Lattice Semiconductor Corp (0.26%), Tetra Tech Inc (0.25%), and II-VI Inc (0.25%) have a slightly smaller but still significant weight. EastGroup Properties Inc and Arrowhead Pharmaceuticals Inc are also represented in the IWM’s holdings at 0.24% and 0.24%.

SHY - Holdings

SHY Bond SectorsWeight
AAA99.67%
Others0.33%
Below B0.0%
B0.0%
BB0.0%
BBB0.0%
A0.0%
AA0.0%
US Government0.0%

SHY’s Top Bond Sectors are ratings of AAA, Others, Below B, B, and BB at 99.67%, 0.33%, 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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Risk Analysis

IWMSHY
Mean Return1.120.09
R-squared77.7339.11
Std. Deviation18.870.89
Alpha-5.12-0.03
Beta1.230.18
Sharpe Ratio0.680.54
Treynor Ratio9.562.6

The iShares Russell 2000 ETF (IWM) has a Standard Deviation of 18.87 with a Mean Return of 1.12 and a Treynor Ratio of 9.56. Its Alpha is -5.12 while IWM’s Sharpe Ratio is 0.68. Furthermore, the fund has a R-squared of 77.73 and a Beta of 1.23.

The iShares 1-3 Year Treasury Bond ETF (SHY) has a Mean Return of 0.09 with a Sharpe Ratio of 0.54 and a R-squared of 39.11. Its Treynor Ratio is 2.6 while SHY’s Alpha is -0.03. Furthermore, the fund has a Standard Deviation of 0.89 and a Beta of 0.18.

IWM’s Mean Return is 1.03 points higher than that of SHY and its R-squared is 38.62 points higher. With a Standard Deviation of 18.87, IWM is slightly more volatile than SHY. The Alpha and Beta of IWM are 5.09 points lower and 1.05 points higher than SHY’s Alpha and Beta.

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Performance

Annual Returns

IWM vs. SHY - Annual Returns

YearIWMSHY
202019.89%3.01%
201925.42%3.42%
2018-11.02%1.45%
201714.66%0.27%
201621.36%0.75%
2015-4.33%0.43%
20144.94%0.48%
201338.85%0.23%
201216.39%0.31%
2011-4.19%1.43%
201026.76%2.23%

IWM had its best year in 2013 with an annual return of 38.85%. IWM’s worst year over the past decade yielded -11.02% and occurred in 2018. In most years the iShares Russell 2000 ETF provided moderate returns such as in 2017, 2012, and 2020 where annual returns amounted to 14.66%, 16.39%, and 19.89% respectively.

The year 2019 was the strongest year for SHY, returning 3.42% on an annual basis. The poorest year for SHY in the last ten years was 2013, with a yield of 0.23%. Most years the iShares 1-3 Year Treasury Bond ETF has given investors modest returns, such as in 2014, 2016, and 2011, when gains were 0.48%, 0.75%, and 1.43% respectively.

Portfolio Growth

IWM vs. SHY - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
IWM$10,000$36,68613.52%
SHY$10,000$11,4861.27%

A $10,000 investment in IWM would have resulted in a final balance of $36,686. This is a profit of $26,686 over 11 years and amounts to a compound annual growth rate (CAGR) of 13.52%.

With a $10,000 investment in SHY, the end total would have been $11,486. This equates to a $1,486 profit over 11 years and a compound annual growth rate (CAGR) of 1.27%.

IWM’s CAGR is 12.25 percentage points higher than that of SHY and as a result, would have yielded $25,200 more on a $10,000 investment. Thus, IWM outperformed SHY by 12.25% annually.


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