MUB vs. SHY: What’s The Difference?

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

The expense ratio of MUB is 0.08 percentage points lower than SHY’s (0.07% vs. 0.15%). MUB is mostly comprised of AA bonds and SHY has a high exposure to AAA bond. Overall, MUB has provided higher returns than SHY over the past 11 years.

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

Summary

MUB SHY
Name iShares National Muni Bond ETF iShares 1-3 Year Treasury Bond ETF
Category Muni National Interm Short Government
Issuer iShares iShares
AUM 22.71B 19.51B
Avg. Return 4.04% 1.27%
Div. Yield 1.96% 0.46%
Expense Ratio 0.07% 0.15%

The iShares National Muni Bond ETF (MUB) is a Muni National Interm fund that is issued by iShares. It currently has 22.71B 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 1.96% with an expense ratio of 0.07%.

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%.

MUB’s dividend yield is 1.50% higher than that of SHY (1.96% vs. 0.46%). Also, MUB yielded on average 2.76% more per year over the past decade (4.04% vs. 1.27%). The expense ratio of MUB is 0.08 percentage points lower than SHY’s (0.07% vs. 0.15%).

Fund Composition

Holdings

MUB - Holdings

MUB Bond Sectors Weight
AA 60.38%
AAA 18.39%
A 15.04%
BBB 6.0%
Others 0.17%
BB 0.02%
Below B 0.0%
B 0.0%
US Government 0.0%

MUB’s Top Bond Sectors are ratings of AA, AAA, A, BBB, and Others at 60.38%, 18.39%, 15.04%, 6.0%, and 0.17%. The fund is less weighted towards BB (0.02%), Below B (0.0%), and B (0.0%) rated bonds.

SHY - Holdings

SHY Bond Sectors Weight
AAA 99.67%
Others 0.33%
Below B 0.0%
B 0.0%
BB 0.0%
BBB 0.0%
A 0.0%
AA 0.0%
US Government 0.0%

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.

Risk Analysis

MUB SHY
Mean Return 0.32 0.09
R-squared 99 39.11
Std. Deviation 3.68 0.89
Alpha -0.46 -0.03
Beta 1.01 0.18
Sharpe Ratio 0.88 0.54
Treynor Ratio 3.2 2.6

The iShares National Muni Bond ETF (MUB) has a Treynor Ratio of 3.2 with a Beta of 1.01 and a Sharpe Ratio of 0.88. Its Standard Deviation is 3.68 while MUB’s R-squared is 99. Furthermore, the fund has a Mean Return of 0.32 and a Alpha of -0.46.

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

MUB’s Mean Return is 0.23 points higher than that of SHY and its R-squared is 59.89 points higher. With a Standard Deviation of 3.68, MUB is slightly more volatile than SHY. The Alpha and Beta of MUB are 0.43 points lower and 0.83 points higher than SHY’s Alpha and Beta.

Performance

Annual Returns

MUB vs. SHY - Annual Returns

Year MUB SHY
2020 4.87% 3.01%
2019 7.28% 3.42%
2018 0.86% 1.45%
2017 4.61% 0.27%
2016 0.06% 0.75%
2015 2.99% 0.43%
2014 8.61% 0.48%
2013 -3.26% 0.23%
2012 6.14% 0.31%
2011 10.85% 1.43%
2010 1.4% 2.23%

MUB had its best year in 2011 with an annual return of 10.85%. MUB’s worst year over the past decade yielded -3.26% and occurred in 2013. In most years the iShares National Muni Bond ETF provided moderate returns such as in 2015, 2017, and 2020 where annual returns amounted to 2.99%, 4.61%, and 4.87% 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

MUB vs. SHY - Portfolio Growth

Fund Initial Balance Final Balance CAGR
MUB $10,000 $15,333 4.04%
SHY $10,000 $11,486 1.27%

A $10,000 investment in MUB would have resulted in a final balance of $15,333. This is a profit of $5,333 over 11 years and amounts to a compound annual growth rate (CAGR) of 4.04%.

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%.

MUB’s CAGR is 2.76 percentage points higher than that of SHY and as a result, would have yielded $3,847 more on a $10,000 investment. Thus, MUB outperformed SHY by 2.76% annually.


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