SHY vs. DFAC: What’s The Difference?

The iShares 1-3 Year Treasury Bond ETF (SHY) and the Dimensional U.S. Core Equity 2 ETF (DFAC) are both among the Top 100 ETFs. SHY is a iShares Short Government fund and DFAC is a Dimensional Fund Advisors Large Blend fund. So, what’s the difference between SHY and DFAC? And which fund is better?

The expense ratio of SHY is 0.04 percentage points lower than DFAC’s (0.15% vs. 0.19%). SHY is mostly comprised of AAA bonds while DFAC has a high exposure to the technology sector. Overall, SHY has provided lower returns than DFAC over the past 11 years.

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

Summary

SHY DFAC
Name iShares 1-3 Year Treasury Bond ETF Dimensional U.S. Core Equity 2 ETF
Category Short Government Large Blend
Issuer iShares Dimensional Fund Advisors
AUM 19.51B 13.53B
Avg. Return 1.27% 13.93%
Div. Yield 0.46% 1.0%
Expense Ratio 0.15% 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%.

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%.

SHY’s dividend yield is 0.54% lower than that of DFAC (0.46% vs. 1.0%). Also, SHY yielded on average 12.66% less per year over the past decade (1.27% vs. 13.93%). The expense ratio of SHY is 0.04 percentage points lower than DFAC’s (0.15% vs. 0.19%).

Fund Composition

Holdings

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.

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

SHY DFAC
Mean Return 0.09 1.19
R-squared 39.11 95.1
Std. Deviation 0.89 15.55
Alpha -0.03 -2.75
Beta 0.18 1.12
Sharpe Ratio 0.54 0.88
Treynor Ratio 2.6 11.85

The iShares 1-3 Year Treasury Bond ETF (SHY) has a Alpha of -0.03 with a Beta of 0.18 and a Mean Return of 0.09. 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 Standard Deviation of 0.89.

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

SHY’s Mean Return is 1.10 points lower than that of DFAC and its R-squared is 55.99 points lower. With a Standard Deviation of 0.89, SHY is slightly less volatile than DFAC. The Alpha and Beta of SHY are 2.72 points higher and 0.94 points lower than DFAC’s Alpha and Beta.

Performance

Annual Returns

SHY vs. DFAC - Annual Returns

Year SHY DFAC
2020 3.01% 15.8%
2019 3.42% 29.54%
2018 1.45% -9.43%
2017 0.27% 18.82%
2016 0.75% 16.31%
2015 0.43% -2.53%
2014 0.48% 9.56%
2013 0.23% 37.55%
2012 0.31% 17.93%
2011 1.43% -1.96%
2010 2.23% 21.67%

SHY had its best year in 2019 with an annual return of 3.42%. SHY’s worst year over the past decade yielded 0.23% and occurred in 2013. In most years the iShares 1-3 Year Treasury Bond ETF provided moderate returns such as in 2014, 2016, and 2011 where annual returns amounted to 0.48%, 0.75%, and 1.43% 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

SHY vs. DFAC - Portfolio Growth

Fund Initial Balance Final Balance CAGR
SHY $10,000 $11,486 1.27%
DFAC $10,000 $38,796 13.93%

A $10,000 investment in SHY would have resulted in a final balance of $11,486. This is a profit of $1,486 over 11 years and amounts to a compound annual growth rate (CAGR) of 1.27%.

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%.

SHY’s CAGR is 12.66 percentage points lower than that of DFAC and as a result, would have yielded $27,310 less on a $10,000 investment. Thus, SHY performed worse than DFAC by 12.66% annually.


Current recommendations:

Over the past years, I have discovered several tools and products that have helped me tremendously on my path to financial freedom:

P.S.: The links below are affiliate links, which means I receive a small commission at no extra cost to you when you sign up for one of the services. Thank you for your support!

1) Take a look at M1 Finance, my favorite broker. I love how easy it is to invest and maintain my portfolio with them. I can set up automatic transfers, rebalance my portfolio with one click and even borrow up to 35% of my assets at super low interest rates!

2) Fundrise is by far the best way I've found to invest in Real Estate. You can diversify your portfolio by investing in their eREITs or even allocate capital to individual properties (without the hassle of managing tenants!).

3) If you are interested in crypto, check out Gemini. I've started allocating a small amount of assets to the growing crypto space and Gemini has just been a breeze to use. Once you register, make sure to also open an Active Trader account to buy crypto at the lowest fees on the market (just 0.03%!).

To see all of my most up-to-date recommendations, check out the Recommended Tools section.

Leave a Reply