The Vanguard FTSE Developed Markets Index Fund ETF Shares (VEA) and the iShares Core U.S. Aggregate Bond ETF (AGG) are both among the Top 100 ETFs. VEA is a Vanguard Foreign Large Blend fund and AGG is a iShares Intermediate-Term Bond fund. So, what’s the difference between VEA and AGG? And which fund is better?
The expense ratio of VEA is 0.01 percentage points higher than AGG’s (0.05% vs. 0.04%). VEA also has a high exposure to the financial services sector while AGG is mostly comprised of AAA bonds. Overall, VEA has provided higher returns than AGG over the past ten years.
In this article, we’ll compare VEA vs. AGG. We’ll look at portfolio growth and risk metrics, as well as at their annual returns and performance. Moreover, I’ll also discuss VEA’s and AGG’s holdings, fund composition, and industry exposure and examine how these affect their overall returns.
|Name||Vanguard FTSE Developed Markets Index Fund ETF Shares||iShares Core U.S. Aggregate Bond ETF|
|Category||Foreign Large Blend||Intermediate-Term Bond|
The Vanguard FTSE Developed Markets Index Fund ETF Shares (VEA) is a Foreign Large Blend fund that is issued by Vanguard. It currently has 157.48B total assets under management and has yielded an average annual return of 7.05% over the past 10 years. The fund has a dividend yield of 2.49% with an expense ratio of 0.05%.
The iShares Core U.S. Aggregate Bond ETF (AGG) is a Intermediate-Term Bond fund that is issued by iShares. It currently has 88.8B 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 1.95% with an expense ratio of 0.04%.
VEA’s dividend yield is 0.54% higher than that of AGG (2.49% vs. 1.95%). Also, VEA yielded on average 3.01% more per year over the past decade (7.05% vs. 4.04%). The expense ratio of VEA is 0.01 percentage points higher than AGG’s (0.05% vs. 0.04%).
FYI: The best way I've found to invest in ETFs is through M1 Finance. It's free and you even get an instant line of credit! Have a look here (link to M1 Finance).
|Samsung Electronics Co Ltd||1.4%|
|ASML Holding NV||1.16%|
|Roche Holding AG||1.1%|
|Toyota Motor Corp||0.92%|
|LVMH Moet Hennessy Louis Vuitton SE||0.84%|
|Shopify Inc A||0.7%|
VEA’s Top Holdings are Nestle SA, Samsung Electronics Co Ltd, ASML Holding NV, Roche Holding AG, and Toyota Motor Corp at 1.5%, 1.4%, 1.16%, 1.1%, and 0.92%.
LVMH Moet Hennessy Louis Vuitton SE (0.84%), Novartis AG (0.82%), and Shopify Inc A (0.7%) have a slightly smaller but still significant weight. AstraZeneca PLC and SAP SE are also represented in the VEA’s holdings at 0.67% and 0.66%.
|AGG Bond Sectors||Weight|
AGG’s Top Bond Sectors are ratings of AAA, BBB, A, AA, and Others at 68.92%, 15.38%, 11.16%, 2.92%, and 1.63%. The fund is less weighted towards Below B (0.0%), B (0.0%), and BB (0.0%) rated bonds.
NOTE: The easiest way to add diversification to your portfolio is to invest in real estate through Fundrise. You can become private real estate investor without the burden of property management! Check it out here (link to Fundrise).
VEA had its best year in 2017 with an annual return of 26.44%. VEA’s worst year over the past decade yielded -14.47% and occurred in 2018. In most years the Vanguard FTSE Developed Markets Index Fund ETF Shares provided moderate returns such as in 2016, 2010, and 2020 where annual returns amounted to 2.51%, 8.47%, and 10.29% respectively.
The year 2019 was the strongest year for AGG, returning 8.68% on an annual basis. The poorest year for AGG in the last ten years was 2013, with a yield of -2.15%. Most years the iShares Core U.S. Aggregate Bond ETF has given investors modest returns, such as in 2017, 2012, and 2014, when gains were 3.53%, 4.04%, and 6.04% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in VEA would have resulted in a final balance of $19,290. This is a profit of $9,290 over 11 years and amounts to a compound annual growth rate (CAGR) of 7.05%.
With a $10,000 investment in AGG, the end total would have been $15,368. This equates to a $5,368 profit over 11 years and a compound annual growth rate (CAGR) of 4.04%.
VEA’s CAGR is 3.01 percentage points higher than that of AGG and as a result, would have yielded $3,922 more on a $10,000 investment. Thus, VEA outperformed AGG by 3.01% annually.
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.