The Vanguard FTSE Developed Markets Index Fund ETF Shares (VEA) and the iShares 1-5 Year Investment Grade Corporate Bond ETF (IGSB) are both among the Top 100 ETFs. VEA is a Vanguard Foreign Large Blend fund and IGSB is a iShares Short-Term Bond fund. So, what’s the difference between VEA and IGSB? And which fund is better?
The expense ratio of VEA is 0.01 percentage points lower than IGSB’s (0.05% vs. 0.06%). VEA also has a high exposure to the financial services sector while IGSB is mostly comprised of BBB bonds. Overall, VEA has provided higher returns than IGSB over the past ten years.
In this article, we’ll compare VEA vs. IGSB. We’ll look at portfolio growth and holdings, as well as at their industry exposure and fund composition. Moreover, I’ll also discuss VEA’s and IGSB’s annual returns, performance, and risk metrics and examine how these affect their overall returns.
|Name||Vanguard FTSE Developed Markets Index Fund ETF Shares||iShares 1-5 Year Investment Grade Corporate Bond ETF|
|Category||Foreign Large Blend||Short-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 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%.
VEA’s dividend yield is 0.47% higher than that of IGSB (2.49% vs. 2.02%). Also, VEA yielded on average 4.54% more per year over the past decade (7.05% vs. 2.51%). The expense ratio of VEA is 0.01 percentage points lower than IGSB’s (0.05% vs. 0.06%).
|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%.
|IGSB Bond Sectors||Weight|
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.
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 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.
|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 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%.
VEA’s CAGR is 4.54 percentage points higher than that of IGSB and as a result, would have yielded $6,187 more on a $10,000 investment. Thus, VEA outperformed IGSB by 4.54% annually.
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