VGT vs. HYG: What’s The Difference?

The Vanguard Information Technology Index Fund ETF Shares (VGT) and the iShares iBoxx $ High Yield Corporate Bond ETF (HYG) are both among the Top 100 ETFs. VGT is a Vanguard Technology fund and HYG is a iShares High Yield Bond fund. So, what’s the difference between VGT and HYG? And which fund is better?

The expense ratio of VGT is 0.38 percentage points lower than HYG’s (0.1% vs. 0.48%). VGT also has a high exposure to the technology sector while HYG is mostly comprised of BB bonds. Overall, VGT has provided higher returns than HYG over the past ten years.

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

Summary

VGT HYG
Name Vanguard Information Technology Index Fund ETF Shares iShares iBoxx $ High Yield Corporate Bond ETF
Category Technology High Yield Bond
Issuer Vanguard iShares
AUM 54.13B 20.03B
Avg. Return 20.84% 6.42%
Div. Yield 0.66% 4.44%
Expense Ratio 0.1% 0.48%

The Vanguard Information Technology Index Fund ETF Shares (VGT) is a Technology fund that is issued by Vanguard. It currently has 54.13B total assets under management and has yielded an average annual return of 20.84% over the past 10 years. The fund has a dividend yield of 0.66% with an expense ratio of 0.1%.

The iShares iBoxx $ High Yield Corporate Bond ETF (HYG) is a High Yield Bond fund that is issued by iShares. It currently has 20.03B total assets under management and has yielded an average annual return of 6.42% over the past 10 years. The fund has a dividend yield of 4.44% with an expense ratio of 0.48%.

VGT’s dividend yield is 3.78% lower than that of HYG (0.66% vs. 4.44%). Also, VGT yielded on average 14.42% more per year over the past decade (20.84% vs. 6.42%). The expense ratio of VGT is 0.38 percentage points lower than HYG’s (0.1% vs. 0.48%).

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Fund Composition

Holdings

VGT - Holdings

VGT Holdings Weight
Apple Inc 19.58%
Microsoft Corp 16.53%
NVIDIA Corp 4.22%
Visa Inc Class A 3.16%
PayPal Holdings Inc 2.76%
Mastercard Inc Class A 2.76%
Adobe Inc 2.39%
Intel Corp 1.94%
Salesforce.com Inc 1.91%
Cisco Systems Inc 1.9%

VGT’s Top Holdings are Apple Inc, Microsoft Corp, NVIDIA Corp, Visa Inc Class A, and PayPal Holdings Inc at 19.58%, 16.53%, 4.22%, 3.16%, and 2.76%.

Mastercard Inc Class A (2.76%), Adobe Inc (2.39%), and Intel Corp (1.94%) have a slightly smaller but still significant weight. Salesforce.com Inc and Cisco Systems Inc are also represented in the VGT’s holdings at 1.91% and 1.9%.

HYG - Holdings

HYG Bond Sectors Weight
BB 56.53%
B 31.27%
Below B 11.4%
BBB 0.61%
AAA 0.28%
A 0.0%
AA 0.0%
US Government 0.0%
Others -0.09%

HYG’s Top Bond Sectors are ratings of BB, B, Below B, BBB, and AAA at 56.53%, 31.27%, 11.4%, 0.61%, and 0.28%. The fund is less weighted towards A (0.0%), AA (0.0%), and US Government (0.0%) rated bonds.

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Risk Analysis

VGT HYG
Mean Return 1.76 0.46
R-squared 74.84 4.1
Std. Deviation 16.61 6.96
Alpha 10.41 3.58
Beta 1.02 0.48
Sharpe Ratio 1.23 0.7
Treynor Ratio 20.55 10.01

The Vanguard Information Technology Index Fund ETF Shares (VGT) has a Sharpe Ratio of 1.23 with a Alpha of 10.41 and a Standard Deviation of 16.61. Its Beta is 1.02 while VGT’s Mean Return is 1.76. Furthermore, the fund has a R-squared of 74.84 and a Treynor Ratio of 20.55.

The iShares iBoxx $ High Yield Corporate Bond ETF (HYG) has a Treynor Ratio of 10.01 with a R-squared of 4.1 and a Beta of 0.48. Its Sharpe Ratio is 0.7 while HYG’s Mean Return is 0.46. Furthermore, the fund has a Alpha of 3.58 and a Standard Deviation of 6.96.

VGT’s Mean Return is 1.30 points higher than that of HYG and its R-squared is 70.74 points higher. With a Standard Deviation of 16.61, VGT is slightly more volatile than HYG. The Alpha and Beta of VGT are 6.83 points higher and 0.54 points higher than HYG’s Alpha and Beta.

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Performance

Annual Returns

VGT vs. HYG - Annual Returns

Year VGT HYG
2020 45.94% 4.12%
2019 48.68% 14.23%
2018 2.52% -1.93%
2017 37.07% 6.09%
2016 13.73% 13.92%
2015 5.02% -5.55%
2014 18.01% 2.0%
2013 30.91% 5.9%
2012 14.05% 13.83%
2011 0.52% 5.89%
2010 12.74% 12.07%

VGT had its best year in 2019 with an annual return of 48.68%. VGT’s worst year over the past decade yielded 0.52% and occurred in 2011. In most years the Vanguard Information Technology Index Fund ETF Shares provided moderate returns such as in 2016, 2012, and 2014 where annual returns amounted to 13.73%, 14.05%, and 18.01% respectively.

The year 2019 was the strongest year for HYG, returning 14.23% on an annual basis. The poorest year for HYG in the last ten years was 2015, with a yield of -5.55%. Most years the iShares iBoxx $ High Yield Corporate Bond ETF has given investors modest returns, such as in 2011, 2013, and 2017, when gains were 5.89%, 5.9%, and 6.09% respectively.

Portfolio Growth

VGT vs. HYG - Portfolio Growth

Fund Initial Balance Final Balance CAGR
VGT $10,000 $72,718 20.84%
HYG $10,000 $19,427 6.42%

A $10,000 investment in VGT would have resulted in a final balance of $72,718. This is a profit of $62,718 over 11 years and amounts to a compound annual growth rate (CAGR) of 20.84%.

With a $10,000 investment in HYG, the end total would have been $19,427. This equates to a $9,427 profit over 11 years and a compound annual growth rate (CAGR) of 6.42%.

VGT’s CAGR is 14.42 percentage points higher than that of HYG and as a result, would have yielded $53,291 more on a $10,000 investment. Thus, VGT outperformed HYG by 14.42% annually.


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