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.
|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|
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%).
|SHY Bond Sectors||Weight|
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.
|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%.
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.
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.
|Fund||Initial Balance||Final Balance||CAGR|
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.
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