The SPDR S&P 500 ETF Trust (SPY) and the iShares 1-5 Year Investment Grade Corporate Bond ETF (IGSB) are both among the Top 100 ETFs. SPY is a SPDR State Street Global Advisors Large Blend fund and IGSB is a iShares Short-Term Bond fund. So, what’s the difference between SPY and IGSB? And which fund is better?
The expense ratio of SPY is 0.03 percentage points higher than IGSB’s (0.09% vs. 0.06%). SPY also has a high exposure to the technology sector while IGSB is mostly comprised of BBB bonds. Overall, SPY has provided higher returns than IGSB over the past ten years.
In this article, we’ll compare SPY vs. IGSB. We’ll look at annual returns and fund composition, as well as at their holdings and risk metrics. Moreover, I’ll also discuss SPY’s and IGSB’s performance, industry exposure, and portfolio growth and examine how these affect their overall returns.
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Summary
| SPY | IGSB | |
| Name | SPDR S&P 500 ETF Trust | iShares 1-5 Year Investment Grade Corporate Bond ETF |
| Category | Large Blend | Short-Term Bond |
| Issuer | SPDR State Street Global Advisors | iShares |
| AUM | 374.03B | 26.63B |
| Avg. Return | 14.41% | 2.51% |
| Div. Yield | 1.3% | 2.02% |
| Expense Ratio | 0.09% | 0.06% |
The SPDR S&P 500 ETF Trust (SPY) is a Large Blend fund that is issued by SPDR State Street Global Advisors. It currently has 374.03B total assets under management and has yielded an average annual return of 14.41% over the past 10 years. The fund has a dividend yield of 1.3% with an expense ratio of 0.09%.
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%.
SPY’s dividend yield is 0.72% lower than that of IGSB (1.3% vs. 2.02%). Also, SPY yielded on average 11.90% more per year over the past decade (14.41% vs. 2.51%). The expense ratio of SPY is 0.03 percentage points higher than IGSB’s (0.09% vs. 0.06%).
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Fund CompositionHoldings
| SPY Holdings | Weight |
| Apple Inc | 5.9% |
| Microsoft Corp | 5.6% |
| Amazon.com Inc | 4.05% |
| Facebook Inc A | 2.29% |
| Alphabet Inc A | 2.02% |
| Alphabet Inc Class C | 1.96% |
| Berkshire Hathaway Inc Class B | 1.45% |
| Tesla Inc | 1.44% |
| NVIDIA Corp | 1.37% |
| JPMorgan Chase & Co | 1.29% |
SPY’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc A, and Alphabet Inc A at 5.9%, 5.6%, 4.05%, 2.29%, and 2.02%.
Alphabet Inc Class C (1.96%), Berkshire Hathaway Inc Class B (1.45%), and Tesla Inc (1.44%) have a slightly smaller but still significant weight. NVIDIA Corp and JPMorgan Chase & Co are also represented in the SPY’s holdings at 1.37% and 1.29%.
| 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.
Risk Analysis
| SPY | IGSB | |
| Mean Return | 1.23 | 0.19 |
| R-squared | 100 | 26.13 |
| Std. Deviation | 13.56 | 2 |
| Alpha | -0.09 | 0.69 |
| Beta | 1 | 0.34 |
| Sharpe Ratio | 1.04 | 0.82 |
| Treynor Ratio | 14.12 | 4.82 |
The SPDR S&P 500 ETF Trust (SPY) has a R-squared of 100 with a Mean Return of 1.23 and a Standard Deviation of 13.56. Its Treynor Ratio is 14.12 while SPY’s Alpha is -0.09. Furthermore, the fund has a Beta of 1 and a Sharpe Ratio of 1.04.
The iShares 1-5 Year Investment Grade Corporate Bond ETF (IGSB) has a Alpha of 0.69 with a Treynor Ratio of 4.82 and a R-squared of 26.13. Its Sharpe Ratio is 0.82 while IGSB’s Beta is 0.34. Furthermore, the fund has a Standard Deviation of 2 and a Mean Return of 0.19.
SPY’s Mean Return is 1.04 points higher than that of IGSB and its R-squared is 73.87 points higher. With a Standard Deviation of 13.56, SPY is slightly more volatile than IGSB. The Alpha and Beta of SPY are 0.78 points lower and 0.66 points higher than IGSB’s Alpha and Beta.
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Performance
Annual Returns
| Year | SPY | IGSB |
| 2020 | 18.25% | 5.26% |
| 2019 | 31.29% | 7.01% |
| 2018 | -4.45% | 1.34% |
| 2017 | 21.69% | 1.41% |
| 2016 | 11.8% | 1.77% |
| 2015 | 1.34% | 0.7% |
| 2014 | 13.53% | 0.74% |
| 2013 | 32.21% | 1.03% |
| 2012 | 15.84% | 3.28% |
| 2011 | 2.06% | 1.34% |
| 2010 | 14.93% | 3.69% |
SPY had its best year in 2013 with an annual return of 32.21%. SPY’s worst year over the past decade yielded -4.45% and occurred in 2018. In most years the SPDR S&P 500 ETF Trust provided moderate returns such as in 2014, 2010, and 2012 where annual returns amounted to 13.53%, 14.93%, and 15.84% respectively.
The year 2019 was the strongest year for IGSB, returning 7.01% on an annual basis. The poorest year for IGSB in the last ten years was 2015, with a yield of 0.7%. Most years the iShares 1-5 Year Investment Grade Corporate Bond ETF has given investors modest returns, such as in 2011, 2017, and 2016, when gains were 1.34%, 1.41%, and 1.77% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| SPY | $10,000 | $41,712 | 14.41% |
| IGSB | $10,000 | $13,103 | 2.51% |
A $10,000 investment in SPY would have resulted in a final balance of $41,712. This is a profit of $31,712 over 11 years and amounts to a compound annual growth rate (CAGR) of 14.41%.
With a $10,000 investment in IGSB, the end total would have been $13,103. This equates to a $3,103 profit over 11 years and a compound annual growth rate (CAGR) of 2.51%.
SPY’s CAGR is 11.90 percentage points higher than that of IGSB and as a result, would have yielded $28,609 more on a $10,000 investment. Thus, SPY outperformed IGSB by 11.90% annually.
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